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ContentsDepartment of the TreasuryInternal Revenue Service Important Changes for 2003 . . . . . . . . . . . . . . . . . . 2

Important Changes for 2004 . . . . . . . . . . . . . . . . . . 2Publication 590 Important Reminders . . . . . . . . . . . . . . . . . . . . . . . 3Cat. No. 15160x

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. Traditional IRAs . . . . . . . . . . . . . . . . . . . . . . . . . 7IndividualWhat Is a Traditional IRA? . . . . . . . . . . . . . . . . . 7Who Can Set Up a Traditional IRA? . . . . . . . . . . 7When Can a Traditional IRA Be Set Up? . . . . . . 8RetirementHow Can a Traditional IRA Be Set Up? . . . . . . . . 8How Much Can Be Contributed? . . . . . . . . . . . . . 10When Can Contributions Be Made? . . . . . . . . . . 11ArrangementsHow Much Can You Deduct? . . . . . . . . . . . . . . . 11What If You Inherit an IRA? . . . . . . . . . . . . . . . . 18(IRAs) Can You Move Retirement Plan Assets? . . . . . . 21When Can You Withdraw or Use Assets? . . . . . . 30When Must You Withdraw Assets?For use in preparing

(Required Minimum Distributions) . . . . . . . . . 31Are Distributions Taxable? . . . . . . . . . . . . . . . . . 372003 Returns What Acts Result in Penalties or Additional

Taxes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

2. Roth IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54What Is a Roth IRA? . . . . . . . . . . . . . . . . . . . . . . 55When Can a Roth IRA Be Set Up? . . . . . . . . . . . 55Can You Contribute to a Roth IRA? . . . . . . . . . . 55Can You Move Amounts Into a Roth IRA? . . . . . 58Are Distributions Taxable? . . . . . . . . . . . . . . . . . 59Must You Withdraw or Use Assets? . . . . . . . . . . 62

3. Savings Incentive Match Plans forEmployees (SIMPLE) . . . . . . . . . . . . . . . . . . . . 63What Is a SIMPLE Plan? . . . . . . . . . . . . . . . . . . 64How Are Contributions Made? . . . . . . . . . . . . . . 65How Much Can Be Contributed on Your

Behalf? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65When Can You Withdraw or Use Assets? . . . . . . 66

4. Retirement Savings Contributions Credit . . . . . 67

5. How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . 68

AppendicesAppendix A. Summary Record of Traditional

IRA(s) for 2003 and Worksheet forDetermining Required MinimumDistributions . . . . . . . . . . . . . . . . . . . . . . . . . 72

Appendix B. Worksheets for SocialSecurity Recipients Who Contribute to aTraditional IRA . . . . . . . . . . . . . . . . . . . . . . . 74

Appendix C. Life Expectancy TablesTable I (Single Life Expectancy) . . . . . . . . . . 81Get forms and other informationTable II (Joint Life and Last Survivorfaster and easier by:

Expectancy) . . . . . . . . . . . . . . . . . . . . . . 83Internet • www.irs.gov or FTP • ftp.irs.gov Table III (Uniform Lifetime) . . . . . . . . . . . . . . 97FAX • 703–368–9694 (from your fax machine)

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98



• You were 50 or older in 2003, andImportant Changes for 2003 • No other salary reduction contributions can be made

for you to the plan for the year because of limits orSimplified employee pension (SEP). SEP-IRAs are no restrictions, such as the regular annual limit.longer covered in this publication. They are covered inPublication 560, Retirement Plans for Small Business. For 2003, the additional amount is the lesser of the

following two amounts.Modified AGI limit for traditional IRAs increased. For2003, if you were covered by a retirement plan at work,

1. $1,000 (up from $500 for 2002), oryour deduction for contributions to a traditional IRA isreduced (phased out) if your modified adjusted gross in- 2. Your compensation for the year reduced by yourcome (AGI) is: other elective deferrals for the year.

• More than $60,000 but less than $70,000 for a mar- For more information, see How Much Can Be Contrib-ried couple filing a joint return or a qualifying uted on Your Behalf? in chapter 3.widow(er),

• More than $40,000 but less than $50,000 for a singleindividual or head of household, or Important Changes for 2004

• Less than $10,000 for a married individual filing aModified AGI limit for traditional IRA contributionsseparate return.increased. For 2004, if you are covered by a retirement

For all filing statuses other than married filing separately, plan at work, your deduction for contributions to a tradi-the upper and lower limits of the phaseout range increased tional IRA will be reduced (phased out) if your modifiedby $6,000. For more information, see How Much Can You adjusted gross income (AGI) is:Deduct? in chapter 1.

• More than $65,000 but less than $75,000 for a mar-Deemed IRAs. For plan years beginning after 2002, a ried couple filing a joint return or a qualifyingqualified employer plan (retirement plan) can maintain a widow(er),separate account or annuity under the plan (a deemed

• More than $45,000 but less than $55,000 for a singleIRA) to receive voluntary employee contributions. If theindividual or head of household, orseparate account or annuity otherwise meets the require-

ments of an IRA, it will be subject only to IRA rules. An • Less than $10,000 for a married individual filing aemployee’s account can be treated as a traditional IRA or a separate return.Roth IRA.

For all filing statuses other than married filing separately,For this purpose, a “qualified employer plan” includes:the upper and lower limits of the phaseout range willincrease by $5,000. See How Much Can You Deduct? in• A qualified pension, profit-sharing, or stock bonuschapter 1.plan (section 401(a) plan),

Increase in limit on salary reduction contributions• A qualified employee annuity plan (section 403(a)under a SIMPLE. For 2004, salary reduction contributionsplan),that your employer can make on your behalf under a• A tax-sheltered annuity plan (section 403(b) plan), SIMPLE plan are increased to $9,000 (up from $8,000 in

and 2003).• A deferred compensation plan (section 457 plan) For more information about salary reduction contribu-

maintained by a state, a political subdivision of a tions, see How Much Can Be Contributed on Your Behalf?state, or an agency or instrumentality of a state or in chapter 3.political subdivision of a state.

Additional salary reduction contributions to SIMPLEIRAs for persons 50 and older. For 2004, additionalIncrease in limit on salary reduction contributionssalary reduction contributions can be made to yourunder a SIMPLE. For 2003, salary reduction contributionsSIMPLE IRA if:that your employer can make on your behalf under a

SIMPLE plan are increased to $8,000 (up from $7,000 in • You will be 50 or older in 2004, and2002).

• No other salary reduction contributions can be madeFor more information about salary reduction contribu-for you to the plan for the year because of limits ortions, see How Much Can Be Contributed on Your Behalf?restrictions, such as the regular annual limit.in chapter 3.

Additional salary reduction contributions to SIMPLE For 2004, the additional amount is the lesser of theIRAs for persons 50 and older. For 2003, additional following two amounts.salary reduction contributions can be made to yourSIMPLE IRA if: 1. $1,500 (up from $1,000 for 2003), or

Page 2



2. Your compensation for the year reduced by your ver From Employer’s Plan Into an IRA under Can Youother elective deferrals for the year. Move Retirement Plan Assets? in chapter 1.

For more information, see How Much Can Be Contrib- Kinds of rollovers from a traditional IRA. You can rolluted on Your Behalf? in chapter 3. over, tax free, a distribution from your traditional IRA into a

qualified plan, including a deferred compensation plan of aNew method for figuring net income on returned orstate or local government (section 457 plan), and arecharacterized IRA contributions. There is a newtax-sheltered annuity plan (section 403(b) plan). The partmethod for figuring the net income on IRA contributionsof the distribution that you can roll over is the part thatmade after 2003 that are returned to you or recharacter-would otherwise be taxable (includible in your income).ized. For more information, see How Do You Recharacter-Qualified plans may, but are not required to, accept suchize a Contribution? or Contributions Returned Before Duerollovers. For more information, see Rollovers under CanDate of Return in chapter 1.You Move Retirement Plan Assets? in chapter 1.

For figuring the net income on IRA contributions madeduring 2002 and 2003 that were returned to you or Rollovers of deferred compensation plans of state andrecharacterized, you can use the method described in this local governments (section 457 plans) into traditionalpublication, the method permitted by Notice 2000–39, or IRAs. If you participate in an eligible deferred compensa-the method in the proposed regulations. tion plan of a state or local government, you may be able to

roll over part or all of your account tax free into an eligibleretirement plan such as a traditional IRA. The most thatyou can roll over is the amount that qualifies as an eligibleImportant Remindersrollover distribution. The rollover may be either direct orindirect.

Traditional IRA contribution and deduction limit. Un-For more information, see Rollovers in chapter 1.less you reached age 50 before 2004, the most that can be

contributed to your traditional IRA for 2003 is the smaller of Roth IRA contribution limit. If contributions on your be-the following amounts: half are made only to Roth IRAs, your contribution limit for

2003 generally is the lesser of:• $3,000, or• $3,000, or• Your taxable compensation for the year.• Your taxable compensation for the year.

If you reached age 50 before 2004, the most that can becontributed to your traditional IRA for 2003 is the smaller of If you were 50 or older in 2003 and contributions on yourthe following amounts: behalf are made only to Roth IRAs, your contribution limit

for 2003 generally is the lesser of:• $3,500, or• $3,500, or• Your taxable compensation for the year.• Your taxable compensation for the year.

For more information, see How Much Can Be Contrib-However, if your modified AGI is above a certain amount,uted? in chapter 1.your contribution limit may be reduced. For more informa-tion, see How Much Can Be Contributed? under Can YouNote. The $3,000 and $3,500 amounts do not increaseContribute to a Roth IRA? in chapter 2.for 2004.

Credit for IRA contributions and salary reduction con-Note. The $3,000 and $3,500 amounts do not increasetributions. If you are an eligible individual, you may be

for 2004.able to claim a credit for a percentage of your qualifiedretirement savings contributions, such as contributions to Contributions to both traditional and Roth IRAs foryour traditional or Roth IRA or salary reduction contribu- same year. If contributions are made on your behalf totions to your SIMPLE. To be eligible, you must be at least both a Roth IRA and a traditional IRA, your contribution18 years old as of the end of the year, and you cannot be a limit for 2003 is the lesser of:student or an individual for whom someone else claims a

• $3,000 ($3,500 if you were 50 or older in 2003)personal exemption. Also, your adjusted gross incomeminus all contributions (other than employer contri-(AGI) must be below a certain amount.butions under a SEP or SIMPLE IRA plan) for theFor more information, see chapter 4.year to all IRAs other than Roth IRAs, or

Rollovers of distributions from employer plans. You • Your taxable compensation minus all contributionscan roll over both the taxable and nontaxable part of a(other than employer contributions under a SEP ordistribution from a qualified plan into a traditional IRA. IfSIMPLE IRA plan) for the year to all IRAs other thanyou have both deductible and nondeductible contributionsRoth IRAs.in your IRA, you will have to keep track of your basis so you

will be able to determine the taxable amount once distribu- However, if your modified AGI is above a certain amount,tions from the IRA begin. For more information, see Rollo- your contribution limit may be reduced. For more informa-

Page 3



tion, see How Much Can Be Contributed? under Can You tributions nor any earnings on them are taxable when youContribute to a Roth IRA? in chapter 2. withdraw them. Roth IRAs are discussed in chapter 2.

Photographs of missing children. The Internal Reve-Note. The $3,000 and $3,500 amounts do not increase nue Service is a proud partner with the National Center for

for 2004. Missing and Exploited Children. Photographs of missingchildren selected by the Center may appear in this publica-Rollovers from SIMPLE IRAs. You may be able to rolltion on pages that would otherwise be blank. You can helpover tax free a distribution from your SIMPLE IRA to abring these children home by looking at the photographsqualified plan, a tax-sheltered annuity plan (section 403(b)and calling 1–800–THE–LOST (1–800–843–5678) ifplan), or deferred compensation plan of a state or localyou recognize a child.government (section 457 plan). For more information, see

When Can You Withdraw or Use Assets? in chapter 3.

Statement of required minimum distribution. If a mini- Introductionmum distribution is required from your IRA, the trustee,

This publication discusses individual retirement arrange-custodian, or issuer that held the IRA at the end of thements (IRAs). An IRA is a personal savings plan that givespreceding year must either report the amount of the re-you tax advantages for setting aside money for retirement.quired minimum distribution to you, or offer to calculate it

for you. The report or offer must include the date by which What are some tax advantages of an IRA? Two taxthe amount must be distributed. The report is due January advantages of an IRA are that:31 of the year in which the minimum distribution is re-quired. It can be provided with the year-end fair market 1. Contributions you make to an IRA may be fully orvalue statement that you normally get each year. No report partially deductible, depending on which type of IRAis required for section 403(b) contracts (generally tax-shel- you have and on your circumstances, andtered annuities) or for IRAs of owners who have died.

2. Generally, amounts in your IRA (including earningsand gains) are not taxed until distributed. In someIRA interest. Although interest earned from your IRA iscases, amounts are not taxed at all if distributedgenerally not taxed in the year earned, it is not tax-exemptaccording to the rules.interest. Do not report this interest on your return as

tax-exempt interest.What’s in this publication? This publication discusses

Form 8606. If you make nondeductible contributions to a traditional, Roth, and SIMPLE IRAs. It explains the rulestraditional IRA and you do not file Form 8606, Nondeduct- for:ible IRAs, with your tax return, you may have to pay a $50

• Setting up an IRA,penalty.

• Contributing to an IRA,Spousal IRAs. In the case of a married couple filing a jointreturn, up to $3,000, ($3,500 if 50 or older) can be contrib- • Transferring money or property to and from an IRA,uted to IRAs (other than SIMPLE IRAs) on behalf of each

• Handling an inherited IRA,spouse, even if one spouse has little or no compensation.For more information, see Spousal IRA Limit under How • Receiving distributions (making withdrawals) from anMuch Can Be Contributed? in chapter 1. IRA, and

The term “50 or older” is used several times in • Taking a credit for contributions to an IRA.this publication. It refers to an IRA owner who isage 50 or older by the end of the tax year. It also explains the penalties and additional taxes that

TIP

apply when the rules are not followed. To assist you inSpouse covered by employer plan. If you are not cov- complying with the tax rules for IRAs, this publicationered by an employer retirement plan and you file a joint contains worksheets, sample forms, and tables, which canreturn, you may be able to deduct all of your contributions be found throughout the publication and in the appendicesto a traditional IRA even if your spouse is covered by a at the back of the publication.plan. For more information, see How Much Can You De-

How to use this publication. The rules that you mustduct? in chapter 1.follow depend on which type of IRA you have. Use Table

Roth IRA. You cannot claim a deduction for any contribu- I-1 to help you determine which parts of this publication totions to a Roth IRA. But, if you satisfy the requirements, all read. Also use Table I-1 if you were referred to this publica-earnings are tax free and neither your nondeductible con- tion from instructions to a form.

Page 4



We respond to many letters by telephone. Therefore, itTable I-1. Using This Publicationwould be helpful if you would include your daytime phonenumber, including the area code, in your correspondence.IF you need THEN see ...

information on ...Useful Itemstraditional IRAs chapter 1.You may want to see:

Roth IRAs chapter 2, andparts of Publicationschapter 1.

❏ 560 Retirement Plans for Small BusinessSIMPLE IRAs chapter 3. (Including SEP, SIMPLE, and Qualified Plans)the credit for qualified retirement chapter 4. ❏ 571 Tax-Sheltered Annuity Plans (403(b) Plans)savings contributions

❏ 575 Pension and Annuity Incomehow to keep a record of yourcontributions to, and distributions appendix A. ❏ 939 General Rule for Pensions and Annuitiesfrom, your traditional IRA(s)

Forms (and instructions)SEP-IRAs and 401(k) plans Publication 560.❏ W–4P Withholding Certificate for Pension orCoverdell education savings

Annuity Paymentsaccounts (formerly called Publication 970.education IRAs) ❏ 1099–R Distributions From Pensions, Annuities,

Retirement or Profit-Sharing Plans, IRAs,Insurance Contracts, etc.

IF for 2003, you THEN see ...❏ 5304–SIMPLE Savings Incentive Match Plan for• received social security

Employees of Small Employersbenefits,(SIMPLE)–Not for Use With a Designated• had taxable compensation,Financial Institution• contributed to a traditional

❏ 5305–S SIMPLE Individual Retirement TrustIRA, andAccount• you or your spouse was

covered by an employer❏ 5305–SA SIMPLE Individual Retirement Custodial

retirement plan, Accountand you want to...

❏ 5305–SIMPLE Savings Incentive Match Plan forfirst figure your modified adjusted appendix B Employees of Small Employers (SIMPLE)–forgross income (AGI) worksheet 1. Use With a Designated Financial Institutionthen figure how much of your ❏ 5329 Additional Taxes on Qualified Plans (Includingappendix Btraditional IRA contribution you can IRAs) and Other Tax-Favored Accountsworksheet 2.deduct

❏ 5498 IRA Contribution Informationand finally figure how much of your appendix Bsocial security is taxable worksheet 3. ❏ 8606 Nondeductible IRAs

❏ 8815 Exclusion of Interest From Series EE and IU.S. Savings Bonds Issued After 1989Comments and suggestions. We welcome your com-

ments about this publication and your suggestions for ❏ 8839 Qualified Adoption Expensesfuture editions.

❏ 8880 Credit for Qualified Retirement SavingsYou can e-mail us at *[email protected]. Please putContributions“Publications Comment” on the subject line.

You can write to us at the following address: See chapter 5 for information about getting these publi-cations and forms.

Internal Revenue ServiceIndividual Forms and Publications BranchSE:W:CAR:MP:T:I1111 Constitution Ave. NWWashington, DC 20224

Page 5



Table I-2. How Are a Traditional IRA and a Roth IRA Different?This table shows the differences between traditional and Roth IRAs. Answers in the middle columnapply to traditional IRAs. Answers in the right column apply to Roth IRAs.

Question Answer

Traditional IRA? Roth IRA?

Yes. You must not have reached age No. You can be any age. See CanIs there an age limit on when I can set 701/2 by the end of the year. See Who You Contribute to a Roth IRA? inup and contribute to a . . . . . . . . . . . . Can Set Up a Traditional IRA? in chapter 2.chapter 1.

Yes. For 2003, you may be able toYes. For 2003, you can contribute to a contribute to a Roth IRA up to:traditional IRA up to: • $3,000, or

• $3,000, or • $3,500 if you were 50 or older by• $3,500 if you were 50 or older by the end of 2003,If I earned more than $3,000 in 2003

the end of 2003. but the amount you can contribute($3,500 if I was 50 or older by the endThere is no upper limit on how much may be less than that depending onof 2003), is there a limit on how muchyou can earn and still contribute. See your income, filing status, and if youI can contribute to a . . . . . . . . . . . . .How Much Can Be Contributed? in contribute to another IRA. See Howchapter 1. Much Can Be Contributed? and TableNote. The $3,000 and $3,500 2–1 in chapter 2.amounts do not increase for 2004. Note. The $3,000 and $3,500

amounts do not increase for 2004.

Yes. You may be able to deduct yourcontributions to a traditional IRAdepending on your income, filing No. You can never deductstatus, whether you are covered by aCan I deduct contributions to a . . . . . contributions to a Roth IRA. See Whatretirement plan at work, and whether is a Roth IRA? in chapter 2.you receive social security benefits.See How Much Can You Deduct? inchapter 1.

Not unless you make nondeductiblecontributions to your traditional IRA. In No. You do not have to file a form ifDo I have to file a form just because I that case, you must file Form 8606. you contribute to a Roth IRA. Seecontribute to a . . . . . . . . . . . . . . . . . . See Nondeductible Contributions in Introduction in chapter 2.chapter 1.

Yes. You must begin receiving No. If you are the owner of a Rothrequired minimum distributions by IRA, you do not have to takeDo I have to start taking distributions April 1 of the year following the year distributions regardless of your age.when I reach a certain age from a . . . you reach age 701/2. See When Must See Are Distributions Taxable? inYou Withdraw Assets? (Required chapter 2.Minimum Distributions) in chapter 1.

Distributions from a traditional IRA aretaxed as ordinary income, but if you Distributions from a Roth IRA are notmade nondeductible contributions, not taxed as long as you meet certainHow are distributions taxed from a . . all of the distribution is taxable. See criteria. See Are DistributionsAre Distributions Taxable? in chapter Taxable? in chapter 2.1.

Yes. File Form 8606 if you receivedNot unless you have ever made a distributions from a Roth IRA (otherDo I have to file a form just because I nondeductible contribution to a than a rollover, recharacterization,receive distributions from a . . . . . . . . traditional IRA. If you have, file Form certain qualified distributions, or a8606. return of certain contributions).

Page 6 Chapter 1 Traditional IRAs



• More than $65,000 but less than $75,000 for a mar-ried couple filing a joint return or a qualifying1.widow(er),

• More than $45,000 but less than $55,000 for a singleTraditional IRAs individual or head of household, or

• Less than $10,000 for a married individual filing aseparate return.Important Changes for 2003

For all filing statuses other than married filing separately,the upper and lower limits of the phaseout range willModified AGI limit for traditional IRAs increased. Forincrease by $5,000. See How Much Can You Deduct? in2003, if you were covered by a retirement plan at work,this chapter.your deduction for contributions to a traditional IRA is

reduced (phased out) if your modified adjusted gross in- New method for figuring net income on returned orcome (AGI) is: recharacterized IRA contributions. There is a new

method for figuring the net income on IRA contributions• More than $60,000 but less than $70,000 for a mar- made after 2003 that are returned to you or recharacter-ried couple filing a joint return or a qualifying ized. For more information, see How Do You Recharacter-widow(er), ize a Contribution? or Contributions Returned Before Due

Date of Return in this chapter.• More than $40,000 but less than $50,000 for a singleFor figuring the net income on IRA contributions madeindividual or head of household, or

during 2002 and 2003 that were returned to you or• Less than $10,000 for a married individual filing a recharacterized, you can use the method described in thisseparate return. publication, the method permitted by Notice 2000–39, or

the method in the proposed regulations.For all filing statuses other than married filing separately,the upper and lower limits of the phaseout range increasedby $6,000. For more information, see How Much Can YouDeduct? in this chapter. Introduction

This chapter discusses the original IRA. In this publicationDeemed IRAs. For plan years beginning after 2002, athe original IRA (sometimes called an ordinary or regularqualified employer plan (retirement plan) can maintain aIRA) is referred to as a “traditional IRA.” The following areseparate account or annuity under the plan (a deemedtwo advantages of a traditional IRA:IRA) to receive voluntary employee contributions. If the

separate account or annuity otherwise meets the require-1. You may be able to deduct some or all of yourments of an IRA, it will be subject only to IRA rules. An

contributions to it, depending on your circumstances.employee’s account can be treated as a traditional IRA or a2. Generally, amounts in your IRA, including earningsRoth IRA.

and gains, are not taxed until they are distributed.For this purpose, a “qualified employer plan” includes:

• A qualified pension, profit-sharing, or stock bonusplan (section 401(a) plan),

What Is a Traditional IRA?• A qualified employee annuity plan (section 403(a)plan), A traditional IRA is any IRA that is not a Roth IRA or a

SIMPLE IRA.• A tax-sheltered annuity plan (section 403(b) plan),and

• A deferred compensation plan (section 457 plan) Who Can Set Upmaintained by a state, a political subdivision of astate, or an agency or instrumentality of a state or a Traditional IRA?political subdivision of a state.

You can set up and make contributions to a traditional IRAif:

Important Changes for 2004 1. You (or, if you file a joint return, your spouse) re-ceived taxable compensation during the year, and

Modified AGI limit for traditional IRA contributions2. You were not age 701/2 by the end of the year.increased. For 2004, if you are covered by a retirement

plan at work, your deduction for contributions to a tradi- You can have a traditional IRA whether or not you aretional IRA will be reduced (phased out) if your modified covered by any other retirement plan. However, you mayadjusted gross income (AGI) is: not be able to deduct all of your contributions if you or your

Chapter 1 Traditional IRAs Page 7



spouse is covered by an employer retirement plan. See Table 1–1. Compensation for PurposesHow Much Can You Deduct, later. of an IRABoth spouses have compensation. If both you and your

Includes ... Does not include ...spouse have compensation and are under age 701/2, eachof you can set up an IRA. You cannot both participate in the earnings and profits fromsame IRA. property.

wages, salaries, etc.interest andWhat Is Compensation?dividend income.

Generally, compensation is what you earn from working. commissions.For a summary of what compensation does and does not pension or annuityinclude, see Table 1–1. Compensation includes the items income.discussed next. self-employment income.

deferred compensation.Wages, salaries, etc. Wages, salaries, tips, professionalalimony and separatefees, bonuses, and other amounts you receive for provid-maintenance.ing personal services are compensation. The IRS treats as

income from certaincompensation any amount properly shown in box 1partnerships.(Wages, tips, other compensation) of Form W–2, Wage

and Tax Statement, provided that amount is reduced byany amounts you excludeany amount properly shown in box 11 (Nonqualified plans).from income.Scholarship and fellowship payments are compensation

for IRA purposes only if shown in box 1 of Form W–2.

Commissions. An amount you receive that is a percent-What Is Not Compensation?age of profits or sales price is compensation.

Self-employment income. If you are self-employed (a Compensation does not include any of the following items.sole proprietor or a partner), compensation is the netearnings from your trade or business (provided your per- • Earnings and profits from property, such as rentalsonal services are a material income-producing factor) income, interest income, and dividend income.reduced by the total of: • Pension or annuity income.1. The deduction for contributions made on your behalf • Deferred compensation received (compensation

to retirement plans, and payments postponed from a past year).2. The deduction allowed for one-half of your self-em- • Income from a partnership for which you do not

ployment taxes. provide services that are a material income-produc-ing factor.Compensation includes earnings from self-employment

even if they are not subject to self-employment tax be- • Any amounts you exclude from income, such ascause of your religious beliefs. foreign earned income and housing costs.

When you have both self-employment income and sala-ries and wages, your compensation includes bothamounts.

Self-employment loss. If you have a net loss from When Can a Traditional IRAself-employment, do not subtract the loss from your sala- Be Set Up?ries or wages when figuring your total compensation.

Alimony and separate maintenance. For IRA purposes, You can set up a traditional IRA at any time. However, thecompensation includes any taxable alimony and separate time for making contributions for any year is limited. Seemaintenance payments you receive under a decree of When Can Contributions Be Made, later.divorce or separate maintenance.

How Can a Traditional IRABe Set Up?You can set up different kinds of IRAs with a variety oforganizations. You can set up an IRA at a bank or otherfinancial institution or with a mutual fund or life insurancecompany. You can also set up an IRA through your stock-broker. Any IRA must meet Internal Revenue Code re-




quirements. The requirements for the various This provision applies to contracts issued after No-arrangements are discussed below. vember 6, 1978.

4. The contract must provide that contributions cannotKinds of traditional IRAs. Your traditional IRA can be anbe more than $3,000 ($3,500 if 50 or older), and thatindividual retirement account or annuity. It can be part ofyou must use any refunded premiums to pay foreither a simplified employee pension (SEP) or an employerfuture premiums or to buy more benefits before theor employee association trust account.end of the calendar year after the year in which youreceive the refund.Individual Retirement Account

5. Distributions must begin by April 1 of the year follow-An individual retirement account is a trust or custodial ing the year in which you reach age 701/2. See Whenaccount set up in the United States for the exclusive Must You Withdraw Assets? (Required Minimum Dis-benefit of you or your beneficiaries. The account is created tributions), later.by a written document. The document must show that theaccount meets all of the following requirements.

Individual Retirement Bonds1. The trustee or custodian must be a bank, a federally

insured credit union, a savings and loan association, The sale of individual retirement bonds issued by theor an entity approved by the IRS to act as trustee or federal government was suspended after April 30, 1982.custodian. The bonds have the following features.

2. The trustee or custodian generally cannot accept1. They stop earning interest when you reach age 701/2.contributions of more than $3,000 ($3,500 if you are

If you die, interest will stop 5 years after your death,50 or older). However, rollover contributions and em-or on the date you would have reached age 701/2,ployer contributions to a simplified employee pensionwhichever is earlier.(SEP), can be more than this amount.

2. You cannot transfer the bonds.3. Contributions, except for rollover contributions, mustbe in cash. See Rollovers, later. If you cash (redeem) the bonds before the year in which

you reach age 591/2, you may be subject to a 10% addi-4. You must have a nonforfeitable right to the amount attional tax. See Age 591/2 Rule under Early Distributions,all times.later. You can roll over redemption proceeds into IRAs.

5. Money in your account cannot be used to buy a lifeinsurance policy.

Simplified Employee Pension (SEP)6. Assets in your account cannot be combined with

other property, except in a common trust fund or A simplified employee pension (SEP) is a written arrange-common investment fund. ment that allows your employer to make deductible contri-

butions to a traditional IRA (a SEP-IRA) set up for you to7. You must start receiving distributions by April 1 of thereceive such contributions. Generally, distributions fromyear following the year in which you reach age 701/2.SEP IRAs are subject to the withdrawal and tax rules thatSee When Must You Withdraw Assets? (Requiredapply to traditional IRAs. See Publication 560 for moreMinimum Distributions), later.information about SEPs.

Individual Retirement Annuity Employer and EmployeeAssociation Trust AccountsYou can set up an individual retirement annuity by

purchasing an annuity contract or an endowment contractYour employer or your labor union or other employeefrom a life insurance company.association can set up a trust to provide individual retire-An individual retirement annuity must be issued in yourment accounts for employees or members. The require-name as the owner, and either you or your beneficiariesments for individual retirement accounts apply to thesewho survive you are the only ones who can receive thetraditional IRAs.benefits or payments.

An individual retirement annuity must meet all the fol-Required Disclosureslowing requirements.

The trustee or issuer (sometimes called the sponsor) of1. Your entire interest in the contract must be nonfor-your traditional IRA generally must give you a disclosurefeitable.statement at least 7 days before you set up your IRA.

2. The contract must provide that you cannot transfer However, the sponsor does not have to give you theany portion of it to any person other than the issuer. statement until the date you set up (or purchase, if earlier)

your IRA, provided you are given at least 7 days from that3. There must be flexible premiums so that if your com-pensation changes, your payment can also change. date to revoke the IRA.




The disclosure statement must explain certain items in Examples. George, who is 34 years old and single,plain language. For example, the statement should explain earns $24,000 in 2003. His IRA contributions for 2003 arewhen and how you can revoke the IRA, and include the limited to $3,000.name, address, and telephone number of the person to Danny, an unmarried college student working part time,receive the notice of cancellation. This explanation must earns $1,500 in 2003. His IRA contributions for 2003 areappear at the beginning of the disclosure statement. limited to $1,500, the amount of his compensation.

If you revoke your IRA within the revocation period, thesponsor must return to you the entire amount you paid.

More than one IRA. If you have more than one IRA, theThe sponsor must report on the appropriate IRS formslimit applies to the total contributions made on your behalfboth your contribution to the IRA (unless it was made by ato all your traditional IRAs for the year.trustee-to-trustee transfer) and the amount returned to

you. These requirements apply to all sponsors.Annuity or endowment contracts. If you invest in anannuity or endowment contract under an individual retire-ment annuity, no more than $3,000 ($3,500 if 50 or older)How Much Can Becan be contributed toward its cost for the tax year, includ-ing the cost of life insurance coverage. If more than thisContributed?amount is contributed, the annuity or endowment contract

There are limits and other rules that affect the amount that is disqualified.can be contributed to a traditional IRA. These limits andrules are explained below. Spousal IRA Limit

If you file a joint return and your taxable compensation isCommunity property laws. Except as discussed laterless than that of your spouse, the most that can be contrib-under Spousal IRA Limit, each spouse figures his or heruted for the year to your IRA is the smaller of the followinglimit separately, using his or her own compensation. This istwo amounts:the rule even in states with community property laws.

1. $3,000 ($3,500 if you are 50 or older), orBrokers’ commissions. Brokers’ commissions paid inconnection with your traditional IRA are subject to the 2. The total compensation includable in the gross in-contribution limit. For information about whether you can come of both you and your spouse for the year,deduct brokers’ commissions, see Brokers’ commissions, reduced by the following two amounts.later under How Much Can You Deduct.

a. Your spouse’s IRA contribution for the year to atraditional IRA.

Trustees’ fees. Trustees’ administrative fees are not sub-b. Any contributions for the year to a Roth IRA onject to the contribution limit. For information about whether

behalf of your spouse.you can deduct trustees’ fees, see Trustees’ fees, laterunder How Much Can You Deduct.

This means that the total combined contributions thatContributions on your behalf to a traditional IRA can be made for the year to your IRA and your spouse’sreduce your limit for contributions to a Roth IRA. IRA can be as much as $6,000 ($6,500 if only one of you isSee chapter 2 for information about Roth IRAs.CAUTION

!50 or older or $7,000 if both of you are 50 or older).

Note. This traditional IRA limit is reduced by any contri-General Limitbutions to a section 501(c)(18) plan (generally, a pensionplan created before June 25, 1959, that is funded entirelyThe most that can be contributed to your traditional IRA isby employee contributions).the smaller of the following amounts:

• $3,000 ($3,500 if you are 50 or older), or Example. Kristin, a full-time student with no taxablecompensation, marries Carl during the year. Neither was• Your taxable compensation (defined earlier) for the50 by the end of 2003. For the year, Carl has taxableyear.compensation of $30,000. He plans to contribute (anddeduct) $3,000 to a traditional IRA. If he and Kristin file ajoint return, each can contribute $3,000 to a traditional IRA.Note. This limit is reduced by any contributions to aThis is because Kristin, who has no compensation, cansection 501(c)(18) plan (generally, a pension plan createdadd Carl’s compensation, reduced by the amount of hisbefore June 25, 1959, that is funded entirely by employeeIRA contribution, ($30,000 – $3,000 = $27,000) to her owncontributions).compensation (–0–) to figure her maximum contribution toThis is the most that can be contributed regardless ofa traditional IRA. In her case, $3,000 is her contributionwhether the contributions are to one or more traditionallimit, because $3,000 is less than $27,000 (her compensa-IRAs or whether all or part of the contributions are nonde-tion for purposes of figuring her contribution limit).ductible. (See Nondeductible Contributions, later.)




receive alimony or file a joint return with a spouse who hasFiling Statuscompensation. See Who Can Set Up a Traditional IRA,earlier. Even if contributions cannot be made for the cur-Generally, except as discussed earlier under Spousal IRArent year, the amounts contributed for years in which youLimit, your filing status has no effect on the amount ofdid qualify can remain in your IRA. Contributions canallowable contributions to your traditional IRA. However, ifresume for any years that you qualify.during the year either you or your spouse was covered by a

retirement plan at work, your deduction may be reduced orContributions must be made by due date. Contribu-eliminated, depending on your filing status and income.tions can be made to your traditional IRA for a year at anySee How Much Can You Deduct, later.time during the year or by the due date for filing your returnfor that year, not including extensions. For most people,Example. Tom and Darcy are married and both are 53.this means that contributions for 2003 must be made byThey both work and each has a traditional IRA. TomApril 15, 2004, and contributions for 2004 must be made byearned $2,800 and Darcy earned $48,000 in 2003. Be-April 15, 2005.cause of the spousal IRA limit rule, even though Tom

earned less than $3,500, they can contribute up to $3,500 Age 701/2 rule. Contributions cannot be made to yourto his IRA for 2003 if they file a joint return. They can traditional IRA for the year in which you reach age 701/2 orcontribute up to $3,500 to Darcy’s IRA. If they file separate for any later year.returns, the amount that can be contributed to Tom’s IRA is You attain age 701/2 on the date that is six calendarlimited to $2,800. months after the 70th anniversary of your birth. If you were

born on June 30, 1933, the 70th anniversary of your birth isLess Than Maximum Contributions June 30, 2003, and you attained age 701/2 on December

30, 2003. If you were born on July 1, 1933, the 70thIf contributions to your traditional IRA for a year were less anniversary of your birth was July 1, 2003, and you at-than the limit, you cannot contribute more after the due tained age 701/2 on January 1, 2004.date of your return for that year to make up the difference.

Designating year for which contribution is made. If anExample. Rafael, who is 40, earns $30,000 in 2003. amount is contributed to your traditional IRA between Jan-

Although he can contribute up to $3,000 for 2003, he uary 1 and April 15, you should tell the sponsor which yearcontributes only $1,000. After April 15, 2004, Rafael can- (the current year or the previous year) the contribution isnot make up the difference between his actual contribu- for. If you do not tell the sponsor which year it is for, thetions for 2003 ($1,000) and his 2003 limit ($3,000). He sponsor can assume, and report to the IRS, that the contri-cannot contribute $2,000 more than the limit for any later bution is for the current year (the year the sponsor receivedyear. it).

Filing before a contribution is made. You can file yourMore Than Maximum Contributions return claiming a traditional IRA contribution before thecontribution is actually made. However, the contributionIf contributions to your IRA for a year were more than themust be made by the due date of your return, not includinglimit, you can apply the excess contribution in one year to aextensions.later year if the contributions for that later year are less

than the maximum allowed for that year. However, a pen- Contributions not required. You do not have to contrib-alty or additional tax may apply. See Excess Contributions, ute to your traditional IRA for every tax year, even if youlater under What Acts Result in Penalties or Additional can.Taxes.

How Much Can You Deduct?When Can ContributionsGenerally, you can deduct the lesser of:Be Made?1. The contributions to your traditional IRA for the year,

As soon as you set up your traditional IRA, contributions orcan be made to it through your chosen sponsor (trustee or

2. The general limit (or the spousal IRA limit, if applica-other administrator). Contributions must be in the form ofble) explained earlier under How Much Can Be Con-money (cash, check, or money order). Property cannot betributed.contributed. However, you may be able to transfer or roll

over certain property from one retirement plan to another. However, if you or your spouse was covered by an em-See the discussion of rollovers and other transfers later in ployer retirement plan, you may not be able to deduct thisthis chapter under Can You Move Retirement Plan Assets. amount. See Limit If Covered By Employer Plan, later.

Contributions can be made to your traditional IRA forYou may be able to claim a credit for contributionseach year that you receive compensation and have notto your traditional IRA. For more information, seereached age 701/2. For any year in which you do not work,chapter 4.contributions cannot be made to your IRA unless you

TIP




Trustees’ fees. Trustees’ administrative fees that are Are You Coveredbilled separately and paid in connection with your tradi- by an Employer Plan?tional IRA are not deductible as IRA contributions. How-ever, they may be deductible as a miscellaneous itemized The Form W–2 you receive from your employer has a boxdeduction on Schedule A (Form 1040). For information used to indicate whether you were covered for the year.about miscellaneous itemized deductions, see Publication The “Retirement Plan” box should be checked if you were529, Miscellaneous Deductions. covered.

Reservists and volunteer firefighters should also seeBrokers’ commissions. These commissions are part of Situations in Which You Are Not Covered, later.your IRA contribution and, as such, are deductible subject If you are not certain whether you were covered by yourto the limits. employer’s retirement plan, you should ask your employer.

Federal judges. For purposes of the IRA deduction, fed-Full deduction. If neither you nor your spouse was cov-eral judges are covered by an employer plan.ered for any part of the year by an employer retirement

plan, you can take a deduction for total contributions to oneor more of your traditional IRAs of up to the lesser of: For Which Year(s) Are You Covered?

1. $3,000 ($3,500 if you are 50 or older), or Special rules apply to determine the tax years for whichyou are covered by an employer plan. These rules differ2. 100% of your compensation.depending on whether the plan is a defined contribution

This limit is reduced by any contributions made to a plan or a defined benefit plan.501(c)(18) plan on your behalf.

Tax year. Your tax year is the annual accounting periodSpousal IRA. In the case of a married couple withyou use to keep records and report income and expensesunequal compensation who file a joint return, the deductionon your income tax return. For almost all people, the taxfor contributions to the traditional IRA of the spouse withyear is the calendar year.less compensation is limited to the lesser of:Defined contribution plan. Generally, you are covered

1. $3,000 ($3,500 if the spouse with the lower compen- by a defined contribution plan for a tax year if amounts aresation is 50 or older), or contributed or allocated to your account for the plan year

that ends with or within that tax year. However, also see2. The total compensation includible in the gross in-Situations in Which You Are Not Covered, later.come of both spouses for the year reduced by the

A defined contribution plan is a plan that provides for afollowing three amounts.separate account for each person covered by the plan. In a

a. The IRA deduction for the year of the spouse with defined contribution plan, the amount to be contributed tothe greater compensation. each participant’s account is spelled out in the plan. The

level of benefits actually provided to a participant dependsb. Any designated nondeductible contribution for theon the total amount contributed to that participant’s ac-year made on behalf of the spouse with thecount and any earnings on those contributions. Types ofgreater compensation.defined contribution plans include profit-sharing plans,

c. Any contributions for the year to a Roth IRA on stock bonus plans, and money purchase pension plans.behalf of the spouse with the greater compensa-tion. Example 1. Company A has a money purchase pen-

sion plan. Its plan year is from July 1 to June 30. The planThis limit is reduced by any contributions to a section provides that contributions must be allocated as of June501(c)(18) plan on behalf of the spouse with the lesser 30. Bob, an employee, leaves Company A on Decembercompensation. 31, 2002. The contribution for the plan year ending on June

30, 2003, is made February 15, 2004. Because an amountNote. If you were divorced or legally separated (and did is contributed to Bob’s account for the plan year, Bob is

not remarry) before the end of the year, you cannot deduct covered by the plan for his 2003 tax year.any contributions to your spouse’s IRA. After a divorce orlegal separation, you can deduct only the contributions to Example 2. Mickey was covered by a profit-sharingyour own IRA. Your deductions are subject to the rules for plan and left the company on December 31, 2002. Thesingle individuals. plan year runs from July 1 to June 30. Under the terms of

the plan, employer contributions do not have to be made,Covered by an employer retirement plan. If you or your but if they are made, they are contributed to the plan beforespouse was covered by an employer retirement plan at any the due date for filing the company’s tax return. Suchtime during the year for which contributions were made, contributions are allocated as of the last day of the planyour deduction may be further limited. This is discussed year, and allocations are made to the accounts of individu-later under Limit If Covered By Employer Plan. Limits on als who have any service during the plan year. As of Junethe amount you can deduct do not affect the amount that 30, 2003, no contributions were made that were allocatedcan be contributed. to the June 30, 2003, plan year, and no forfeitures had




been allocated within the plan year. In addition, as of that1. The plan you participate in is established for its em-date, the company was not obligated to make a contribu-

ployees by:tion for such plan year and it was impossible to determinewhether or not a contribution would be made for the plan a. The United States,year. On December 31, 2003, the company decided to

b. A state or political subdivision of a state, orcontribute to the plan for the plan year ending June 30,2003. That contribution was made on February 15, 2004. c. An instrumentality of either (a) or (b) above.Because an amount was allocated to Mickey’s account asof June 30, 2003, Mickey is an active participant in the plan 2. You did not serve more than 90 days on active dutyfor his 2004 tax year but not for his 2003 tax year. during the year (not counting duty for training).

No vested interest. If an amount is allocated to youraccount for a plan year, you are covered by that plan even Volunteer firefighters. If the only reason you participateif you have no vested interest in (legal right to) the account. in a plan is because you are a volunteer firefighter, you

may not be covered by the plan. You are not covered byDefined benefit plan. If you are eligible to participate inthe plan if both of the following conditions are met.your employer’s defined benefit plan for the plan year that

ends within your tax year, you are covered by the plan. 1. The plan you participate in is established for its em-This rule applies even if you: ployees by:

• Declined to participate in the plan,a. The United States,

• Did not make a required contribution, orb. A state or political subdivision of a state, or

• Did not perform the minimum service required toc. An instrumentality of either (a) or (b) above.accrue a benefit for the year.

2. Your accrued retirement benefits at the beginning ofA defined benefit plan is any plan that is not a definedthe year will not provide more than $1,800 per yearcontribution plan. In a defined benefit plan, the level ofat retirement.benefits to be provided to each participant is spelled out in

the plan. The plan administrator figures the amountneeded to provide those benefits and those amounts are Limit If Covered By Employer Plancontributed to the plan. Defined benefit plans include pen-sion plans and annuity plans. As discussed earlier, the deduction you can take for contri-

butions made to your traditional IRA depends on whetherExample. Nick, an employee of Company B, is eligible you or your spouse was covered for any part of the year by

to participate in Company B’s defined benefit plan, which an employer retirement plan. Your deduction is also af-has a July 1 to June 30 plan year. Nick leaves Company B fected by how much income you had and by your filingon December 31, 2002. Since Nick is eligible to participate status. Your deduction may also be affected by socialin the plan for its year ending June 30, 2003, he is covered security benefits you received.by the plan for his 2003 tax year.

Reduced or no deduction. If either you or your spouseNo vested interest. If you accrue a benefit for a planwas covered by an employer retirement plan, you may beyear, you are covered by that plan even if you have noentitled to only a partial (reduced) deduction or no deduc-vested interest in (legal right to) the accrual.tion at all, depending on your income and your filing status.

Your deduction begins to decrease (phase out) whenSituations in Which You Are Not Covered your income rises above a certain amount and is elimi-

nated altogether when it reaches a higher amount. TheseUnless you are covered by another employer plan, you are amounts vary depending on your filing status.not covered by an employer plan if you are in one of the

To determine if your deduction is subject to thesituations described below.phaseout, you must determine your modified adjustedgross income (AGI) and your filing status, as explainedSocial security or railroad retirement. Coverage underlater under Deduction Phaseout. Once you have deter-social security or railroad retirement is not coverage undermined your modified AGI and your filing status, you canan employer retirement plan.use Table 1–2 or Table 1–3 to determine if the phaseout

Benefits from previous employer’s plan. If you receive applies.retirement benefits from a previous employer’s plan, youare not covered by that plan.

Social Security RecipientsReservists. If the only reason you participate in a plan isbecause you are a member of a reserve unit of the armed Instead of using Table 1–2 or Table 1–3 and Worksheetforces, you may not be covered by the plan. You are not 1–2, Figuring Your Reduced IRA Deduction for 2003,covered by the plan if both of the following conditions are later, complete the worksheets in Appendix B of this publi-met. cation if, for the year, all of the following apply.




Table 1–3. Effect of Modified AGI1 on1. You received social security benefits. Deduction If You Are NOT Covered by a2. You received taxable compensation. Retirement Plan at Work3. Contributions were made to your traditional IRA.

If you are not covered by a retirement plan at work, use4. You or your spouse was covered by an employer this table to determine if your modified AGI affects the

retirement plan. amount of your deduction.

Use the worksheets in Appendix B to figure your IRAAND your modifieddeduction, your nondeductible contribution, and the tax-adjusted grossable portion, if any, of your social security benefits. Appen-

IF your filing income (modified THEN youdix B includes an example with filled-in worksheets tostatus is ... AGI) is ... can take ...assist you.single,head ofTable 1–2. Effect of Modified AGI1 on a fullhousehold, or any amountDeduction If You Are Covered by a deduction.qualifyingRetirement Plan at Work widow(er)

married filingIf you are covered by a retirement plan at work, use thisjointly ortable to determine if your modified AGI affects the amountseparately with a a fullof your deduction. any amountspouse who is not deduction.covered by a planAND yourat workmodified adjusted

gross income a full$150,000 or lessIF your filing (modified AGI) THEN you can deduction.married filingstatus is ... is ... take ...

more than $150,000jointly with a a partial $40,000 or less a full deduction. but less thanspouse who is deduction.$160,000covered by a planmore thansingle or at work$40,000 a partial nohead of $160,000 or morebut less than deduction. deduction.household $50,000married filing a partialless than $10,000$50,000 or more no deduction. separately with a deduction.spouse who is $60,000 or less a full deduction. nocovered by a plan $10,000 or more deduction.at work2more thanmarried filing

$60,000 a partialjointly or 1 Modified AGI (adjusted gross income). See Modifiedbut less than deduction.qualifyingadjusted gross income (AGI), later.$70,000widow(er) 2 You are entitled to the full deduction if you did not livewith your spouse at any time during the year.$70,000 or more no deduction.

less than $10,000 a partialmarried filing deduction.

Deduction Phaseoutseparately2

$10,000 or more no deduction.The amount of any reduction in the limit on your IRA1 Modified AGI (adjusted gross income). See Modifieddeduction (phaseout) depends on whether you or youradjusted gross income (AGI), later.spouse was covered by an employer retirement plan.2 If you did not live with your spouse at any time during

the year, your filing status is considered Single for this Covered by a retirement plan. If you are covered by anpurpose (therefore, your IRA deduction is determined employer retirement plan and you did not receive anyunder the “Single” filing status). social security retirement benefits, your IRA deduction

may be reduced or eliminated depending on your filingstatus and modified AGI, as shown in Table 1–2.

For 2004, if you are covered by a retirement planat work, your IRA deduction will not be reduced(phased out) unless your modified AGI is:

TIP

• More than $45,000 but less than $55,000 for a singleindividual (or head of household),




Worksheet 1–1. Figuring Your Modified AGIUse this worksheet to figure your modified AGI for traditional IRA purposes.

1. Enter your adjusted gross income (AGI) shown on line 22, Form 1040A, or line 35,Form 1040 figured without taking into account line 17, Form 1040A, or line 24, Form1040 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2. Enter any student loan interest deduction from line 18, Form 1040A, or line 25, Form1040 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.

3. Enter any tuition and fees deduction from line 19, Form 1040A, or line 26, Form 1040 3.

4. Enter any foreign earned income exclusion and/or housing exclusion from line 18,Form 2555–EZ, or line 43, Form 2555 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

5. Enter any foreign housing deduction from line 48, Form 2555 . . . . . . . . . . . . . . . . . . 5.

6. Enter any excluded qualified savings bond interest shown on line 3, Schedule 1,Form 1040A, or line 3, Schedule B, Form 1040 (from line 14, Form 8815) . . . . . . . . . 6.

7. Enter any exclusion of employer-provided adoption benefits shown on line 30, Form8839 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Add lines 1 through 7. This is your Modified AGI for traditional IRA purposes . . . . . . 8.

• More than $65,000 but less than $75,000 for a mar- Form 1040. If you file Form 1040, refigure the amountried couple filing a joint return (or a qualifying on the page 1 “adjusted gross income” line without takingwidow(er)), or into account any of the following amounts.

• Less than $10,000 for a married individual filing a • IRA deduction.separate return.• Student loan interest deduction.

For all filing statuses other than married filing separately, • Tuition and fees deduction.the upper and lower limits of the phaseout range willincrease by $5,000. • Foreign earned income exclusion.

• Foreign housing exclusion or deduction.If your spouse is covered. If you are not covered by an

• Exclusion of qualified savings bond interest shownemployer retirement plan, but your spouse is, and you didon Form 8815.not receive any social security benefits, your IRA deduc-

tion may be reduced or eliminated entirely depending on • Exclusion of employer-provided adoption benefitsyour filing status and modified AGI as shown in Table 1–3. shown on Form 8839.

Filing status. Your filing status depends primarily on your This is your modified AGI.marital status. For this purpose you need to know if your Form 1040A. If you file Form 1040A, refigure thefiling status is single or head of household, married filing

amount on the page 1 “adjusted gross income” line withoutjointly or qualifying widow(er), or married filing separately.taking into account any of the following amounts.If you need more information on filing status, see Publica-

tion 501, Exemptions, Standard Deduction, and Filing In- • IRA deduction.formation.• Student loan interest deduction.Lived apart from spouse. If you did not live with your

spouse at any time during the year and you file a separate • Tuition and fees deduction.return, your filing status, for this purpose, is single. • Exclusion of qualified bond interest shown on Form

8815.Modified adjusted gross income (AGI). You can useWorksheet 1–1 to figure your modified AGI. If you made • Exclusion of employer-provided adoption benefitscontributions to your IRA for 2003 and received a distribu- shown on Form 8839.tion from your IRA in 2003, see Both contributions for 2003

This is your modified AGI.and distributions in 2003, later.Income from IRA distributions. If you received distri-Do not assume that your modified AGI is the

butions in 2003 from one or more traditional IRAs and yoursame as your compensation. Your modified AGItraditional IRAs include only deductible contributions, themay include income in addition to your compen-CAUTION

!distributions are fully taxable and are included in yoursation such as interest, dividends, and income from IRAmodified AGI.distributions.




Both contributions for 2003 and distributions in 2003. Because he was covered by a retirement plan and2003. If all three of the following apply, any IRA distribu- his modified AGI is above $50,000, he cannot deduct histions you received in 2003 may be partly tax free and partly $3,000 IRA contribution. He must designate this contribu-taxable. tion as a nondeductible contribution by reporting it on Form

8606.1. You received distributions in 2003 from one or more

Form 8606. To designate contributions as nondeductible,traditional IRAs,you must file Form 8606. (See the filled-in Forms 8606 in

2. You made contributions to a traditional IRA for 2003, this chapter.)and You do not have to designate a contribution as nonde-

ductible until you file your tax return. When you file, you3. Some of those contributions may be nondeductiblecan even designate otherwise deductible contributions ascontributions. (See Nondeductible Contributions andnondeductible contributions.Worksheet 1–2, later.).

You must file Form 8606 to report nondeductible contri-If this is your situation, you must figure the taxable part of butions even if you do not have to file a tax return for thethe traditional IRA distribution before you can figure your year.modified AGI. To do this, you can use Worksheet 1–5,Figuring the Taxable Part of Your IRA Distribution. Failure to report nondeductible contributions. If you

If at least one of the above does not apply, figure your do not report nondeductible contributions, all of the contri-modified AGI using Worksheet 1–1. butions to your traditional IRA will be treated as deductible.

All distributions from your IRA will be taxed unless you canshow, with satisfactory evidence, that nondeductible con-

How To Figure Your Reduced IRA Deduction tributions were made.

If you or your spouse is covered by an employer retirement Penalty for overstatement. If you overstate the amountplan and you did not receive any social security benefits, of nondeductible contributions on your Form 8606 for anyyou can figure your reduced IRA deduction by using Work- tax year, you must pay a penalty of $100 for each over-sheet 1–2, Figuring Your Reduced IRA Deduction for statement, unless it was due to reasonable cause.2003. The instructions for both Form 1040 and Form

Penalty for failure to file Form 8606. You will have to1040A include similar worksheets that you can use insteadpay a $50 penalty if you do not file a required Form 8606,of the worksheet in this publication.unless you can prove that the failure was due to reasona-If you or your spouse is covered by an employer retire-ble cause.ment plan, and you received any social security benefits,

see Social Security Recipients, earlier. Tax on earnings on nondeductible contributions. Aslong as contributions are within the contribution limits,

Note. If you were married and both you and your none of the earnings or gains on contributions (deductiblespouse contributed to IRAs, figure your deduction and your or nondeductible) will be taxed until they are distributed.spouse’s deduction separately.

Cost basis. You will have a cost basis in your traditionalIRA if you made any nondeductible contributions. YourReporting Deductible Contributionscost basis is the sum of the nondeductible contributions toyour IRA minus any withdrawals or distributions of nonde-If you file Form 1040, enter your IRA deduction on line 24ductible contributions.of that form. If you file Form 1040A, enter your IRA deduc-

tion on line 17 of that form. You cannot deduct IRA contri- Commonly, distributions from your traditionalbutions on Form 1040EZ. IRAs will include both taxable and nontaxable

(cost basis) amounts. See Are Distributions Tax-CAUTION!

Self-employed. If you are self-employed (a sole proprie-able, later, for more information.tor or partner) and have a SIMPLE IRA, enter your deduc-

tion for allowable plan contributions on line 30, Form 1040. Recordkeeping. There is a recordkeeping work-sheet, Appendix A, Summary Record of Tradi-

Nondeductible Contributions tional IRA(s) for 2003, that you can use to keep aRECORDS

record of deductible and nondeductible IRA contributions.Although your deduction for IRA contributions may bereduced or eliminated, contributions can be made to your

Examples — Worksheet forIRA of up to the general limit or, if it applies, the spousalIRA limit. The difference between your total permitted Reduced IRA Deduction for 2003contributions and your IRA deduction, if any, is your non-deductible contribution. The following examples illustrate the use of Worksheet

1–2, Figuring Your Reduced IRA Deduction for 2003.Example. Tony is 29 years old and single. In 2003, he

was covered by a retirement plan at work. His salary is Example 1. For 2003, Tom and Betty file a joint return$52,312. His modified adjusted gross income (modified on Form 1040. They are both 39 years old. They are bothAGI) is $55,000. Tony makes a $3,000 IRA contribution for employed and Tom is covered by his employer’s retire-




Worksheet 1–2. Figuring Your Reduced IRA Deduction for 2003

(Use only if you or your spouse is covered by an employer plan and your modified AGI fallsbetween the two amounts shown below for your coverage situation and filing status.)

Note. If you were married and both you and your spouse contributed to IRAs, figure your deductionand your spouse’s deduction separately.

AND yourmodified THEN enter

AND your AGI is on line 1IF you ... filing status is ... over ... below ...

single or head ofare covered by anhousehold $40,000 $50,000employer plan

married filing jointly orqualifying widow(er) $60,000 $70,000

married filing separately $0 $10,000

married filing jointly $150,000 $160,000are not covered by anemployer plan, but yourspouse is covered


1. Enter applicable amount from table above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2. Enter your modified AGI (that of both spouses, if married filing jointly) . . . . . . . . . . . 2.

Note. If line 2 is equal to or more than the amount on line 1, stop here.Your IRA contributions are not deductible. See Nondeductible Contributions.

3. Subtract line 2 from line 1. If line 3 is $10,000 or more, stop here. You can take afull IRA deduction for contributions of up to $3,000 ($3,500 if 50 or older) or 100% ofyour (and if married filing jointly, your spouse’s) compensation, whichever is less . . . 3.

4. Multiply line 3 by 30% (.30) (by 35% (.35) if age 50 or older). If the result is not amultiple of $10, round it to the next highest multiple of $10. (For example, $611.40 isrounded to $620.) However, if the result is less than $200, enter $200 . . . . . . . . . . . . 4.

5. Enter your compensation minus any deductions on Form 1040, line 28 (one-half ofself-employment tax) and line 30 (self-employed SEP, SIMPLE, and qualified plans).If you are filing a joint return and your compensation is less than your spouse’s,include your spouse’s compensation reduced by his or her traditional IRA and RothIRA contributions for this year. If you file Form 1040, do not reduce yourcompensation by any losses from self-employment . . . . . . . . . . . . . . . . . . . . . . . . . . 5.

6. Enter contributions made, or to be made, to your IRA for 2003 but do not enter morethan $3,000 ($3,500 if 50 or older). If contributions are more than $3,000 ($3,500 if50 or older), see Excess Contributions, later. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. IRA deduction. Compare lines 4, 5, and 6. Enter the smallest amount (or a smalleramount if you choose) here and on the Form 1040 or 1040A line for your IRA,whichever applies. If line 6 is more than line 7 and you want to make a nondeductiblecontribution, go to line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Nondeductible contribution. Subtract line 7 from line 5 or 6, whichever is smaller.Enter the result here and on line 1 of your Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . 8.




ment plan. Tom’s salary is $40,000 and Betty’s is $26,555. Inherited from spouse. If you inherit a traditional IRAThey each have a traditional IRA and their combined from your spouse, you generally have the following threemodified AGI, which includes $2,000 interest and dividend choices. You can:income, is $68,555. Because their modified AGI is be-

1. Treat it as your own IRA by designating yourself astween $60,000 and $70,000 and Tom is covered by anthe account owner.employer plan, Tom is subject to the deduction phaseout

discussed earlier under Limit If Covered By Employer Plan. 2. Treat it as your own by rolling it over into your tradi-For 2003, Tom contributed $3,000 to his IRA and Betty tional IRA, or to the extent it is taxable, into a:

contributed $3,000 to hers. Even though they file a jointa. Qualified employer plan,return, they must use separate worksheets to figure the

IRA deduction for each of them. b. Qualified employee annuity plan (section 403(a)Tom can take a deduction of only $440. plan),He can choose to treat the $440 as either deductible or

c. Tax-sheltered annuity plan (section 403(b) plan),nondeductible contributions. He can either leave the$2,560 ($3,000 − $440) of nondeductible contributions in d. Deferred compensation plan of a state or localhis IRA or withdraw them by April 15, 2004. He decides to government (section 457 plan), ortreat the $440 as deductible contributions and leave the$2,560 of nondeductible contributions in his IRA. 3. Treat yourself as the beneficiary rather than treating

Using Worksheet 1–2, Figuring Your Reduced IRA De- the IRA as your own.duction for 2003, Tom figures his deductible and nonde-ductible amounts as shown on Worksheet 1–2, Figuring Treating it as your own. You will be considered toYour Reduced IRA Deduction for 2003–Example 1 Illus- have chosen to treat the IRA as your own if:trated.

• Contributions (including rollover contributions) areBetty figures her IRA deduction as follows. Betty canmade to the inherited IRA, ortreat all or part of her contributions as either deductible or

nondeductible. This is because her $3,000 contribution for • You do not take the required minimum distribution2003 is not subject to the deduction phaseout discussed for a year as a beneficiary of the IRA.earlier under Limit If Covered By Employer Plan. She does

You will only be considered to have chosen to treat the IRAnot need to use Worksheet 1–2, Figuring Your Reducedas your own if:IRA Deduction for 2003, because their modified AGI is not

within the phaseout range that applies. Betty decides to • You are the sole beneficiary of the IRA, andtreat her $3,000 IRA contributions as deductible.

• You have an unlimited right to withdraw amountsThe IRA deductions of $440 and $3,000 on the jointfrom it.return for Tom and Betty total $3,440.

However, if you receive a distribution from your de-Example 2. For 2003, Ed and Sue file a joint return onceased spouse’s IRA, you can roll that distribution overForm 1040. They are both 39 years old. Ed is covered byinto your own IRA within the 60-day time limit, as long ashis employer’s retirement plan. Ed’s salary is $40,000. Suethe distribution is not a required distribution, even if you arehad no compensation for the year and did not contribute tonot the sole beneficiary of your deceased spouse’s IRA.an IRA. Ed contributed $3,000 to his traditional IRA andFor more information, see When Must You Withdraw As-$3,000 to a traditional IRA for Sue (a spousal IRA). Theirsets? (Required Minimum Distributions), later.combined modified AGI, which includes $2,000 interest

and dividend income and a large capital gain from the saleInherited from someone other than spouse. If you in-of stock, is $156,555.herit a traditional IRA from anyone other than your de-Because the combined modified AGI is $70,000 orceased spouse, you cannot treat the inherited IRA as yourmore, Ed cannot deduct any of the contribution to hisown. This means that you cannot make any contributionstraditional IRA. He can either leave the $3,000 of nonde-to the IRA. It also means you cannot roll over any amountsductible contributions in his IRA or withdraw them by Aprilinto or out of the inherited IRA. However, you can make a15, 2004.trustee-to-trustee transfer as long as the IRA into which

Sue figures her IRA deduction as shown on Worksheet amounts are being moved is set up and maintained in the1–2, Figuring Your Reduced IRA Deduction for 2003— name of the deceased IRA owner for the benefit of you asExample 2 Illustrated. beneficiary.

Like the original owner, you generally will not owe tax onthe assets in the IRA until you receive distributions from it.

What If You Inherit an IRA? You must begin receiving distributions from the IRA underthe rules for distributions that apply to beneficiaries.

If you inherit a traditional IRA, you are called a benefi-ciary. A beneficiary can be any person or entity the owner IRA with basis. If you inherit a traditional IRA from achooses to receive the benefits of the IRA after he or she person who had a basis in the IRA because of nondeduct-dies. Beneficiaries of a traditional IRA must include in their ible contributions, that basis remains with the IRA. Unlessgross income any taxable distributions they receive. you are the decedent’s spouse and choose to treat the IRA




Worksheet 1–2. Figuring Your Reduced IRA Deduction for 2003—Example 1 Illustrated



AND yourAND your modified AGI THEN enter on line 1

IF you ... filing status is ... is over ... below ...






1. Enter applicable amount from table above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 70,000

2. Enter your modified AGI (that of both spouses, if married filing jointly) . . . . . . . . . . . 2. 68,555


3. Subtract line 2 from line 1. If line 3 is $10,000 or more, stop here. You can take afull IRA deduction for contributions of up to $3,000 ($3,500 if 50 or older) or 100% ofyour (and if married filing jointly, your spouse’s) compensation, whichever is less . . . 3. 1,445

4. Multiply line 3 by 30% (.30) (by 35% (.35) if age 50 or older). If the result is not amultiple of $10, round it to the next highest multiple of $10. (For example, $611.40 isrounded to $620.) However, if the result is less than $200, enter $200 . . . . . . . . . . . . 4. 440

5. Enter your compensation minus any deductions on Form 1040, line 28 (one-half ofself-employment tax) and line 30 (self-employed SEP, SIMPLE, and qualified plans).If you are filing a joint return and your compensation is less than your spouse’s,include your spouse’s compensation reduced by his or her traditional IRA and RothIRA contributions for this year. If you file Form 1040, do not reduce yourcompensation by any losses from self-employment . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 40,000

6. Enter contributions made, or to be made, to your IRA for 2003 but do not enter morethan $3,000 ($3,500 if 50 or older). If contributions are more than $3,000 ($3,500 if50 or older), see Excess Contributions, later. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 3,000

7. IRA deduction. Compare lines 4, 5, and 6. Enter the smallest amount (or a smalleramount if you choose) here and on the Form 1040 or 1040A line for your IRA,whichever applies. If line 6 is more than line 7 and you want to make a nondeductiblecontribution, go to line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 440

8. Nondeductible contribution. Subtract line 7 from line 5 or 6, whichever is smaller.Enter the result here and on line 1 of your Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . 8. 2,560




Worksheet 1–2. Figuring Your Reduced IRA Deduction for 2003—Example 2 Illustrated



AND yourAND your modified AGI THEN enter on line 1

IF you ... filing status is ... is over ... below ...






1. Enter applicable amount from table above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 160,000

2. Enter your modified AGI (that of both spouses, if married filing jointly) . . . . . . . . . . . 2. 156,555


3. Subtract line 2 from line 1. If line 3 is $10,000 or more, stop here. You can take afull IRA deduction for contributions of up to $3,000 ($3,500 if 50 or older) or 100% ofyour (and if married filing jointly, your spouse’s) compensation, whichever is less . . . 3. 3,445

4. Multiply line 3 by 30% (.30) (by 35% (.35) if age 50 or older). If the result is not amultiple of $10, round it to the next highest multiple of $10. (For example, $611.40 isrounded to $620.) However, if the result is less than $200, enter $200 . . . . . . . . . . . . 4. 1,040

5. Enter your compensation minus any deductions on Form 1040, line 28 (one-half ofself-employment tax) and line 30 (self-employed SEP, SIMPLE, and qualified plans).If you are filing a joint return and your compensation is less than your spouse’s,include your spouse’s compensation reduced by his or her traditional IRA and RothIRA contributions for this year. If you file Form 1040, do not reduce yourcompensation by any losses from self-employment . . . . . . . . . . . . . . . . . . . . . . . . . . 5. 37,000

6. Enter contributions made, or to be made, to your IRA for 2003 but do not enter morethan $3,000 ($3,500 if 50 or older). If contributions are more than $3,000 ($3,500 if50 or older), see Excess Contributions, later. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 3,000

7. IRA deduction. Compare lines 4, 5, and 6. Enter the smallest amount (or a smalleramount if you choose) here and on the Form 1040 or 1040A line for your IRA,whichever applies. If line 6 is more than line 7 and you want to make a nondeductiblecontribution, go to line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. 1,040

8. Nondeductible contribution. Subtract line 7 from line 5 or 6, whichever is smaller.Enter the result here and on line 1 of your Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . 8. 1,960




as your own, you cannot combine this basis with any basis Trustee-to-Trustee Transferyou have in your own traditional IRA(s) or any basis intraditional IRA(s) you inherited from other decedents. If A transfer of funds in your traditional IRA from one trustee

directly to another, either at your request or at the trustee’syou take distributions from both an inherited IRA and yourrequest, is not a rollover. Because there is no distributionIRA, and each has basis, you must complete separateto you, the transfer is tax free. Because it is not a rollover, itForms 8606 to determine the taxable and nontaxable por-is not affected by the 1-year waiting period required be-tions of those distributions.tween rollovers. This waiting period is discussed laterunder Rollover From One IRA Into Another.

Federal estate tax deduction. A beneficiary may be able For information about direct transfers from retirementto claim a deduction for estate tax resulting from certain programs other than traditional IRAs, see Direct rolloverdistributions from a traditional IRA. The beneficiary can option, later.deduct the estate tax paid on any part of a distribution thatis income in respect of a decedent. He or she can take the Rolloversdeduction for the tax year the income is reported. Forinformation on claiming this deduction, see Estate Tax Generally, a rollover is a tax-free distribution to you of cashDeduction under Other Tax Information in Publication 559, or other assets from one retirement plan that you contrib-Survivors, Executors, and Administrators. ute to another retirement plan. The contribution to the

second retirement plan is called a “rollover contribution.”Any taxable part of a distribution that is not income inrespect of a decedent is a payment the beneficiary must

Note. An amount rolled over tax free from one retire-include in income. However, the beneficiary cannot takement plan to another is generally includible in income whenany estate tax deduction for this part.it is distributed from the second plan.A surviving spouse can roll over the distribution to an-

other traditional IRA and avoid including it in income for the Kinds of rollovers to a traditional IRA. You can roll overyear received. amounts from the following plans into a traditional IRA:

1. A traditional IRA,More information. For more information about rollovers,

2. An employer’s qualified retirement plan for its em-required distributions, and inherited IRAs, see:ployees,

• Rollovers, later under Can You Move Retirement3. A deferred compensation plan of a state or localPlan Assets,

government (section 457 plan), or• When Must You Withdraw Assets? (Required Mini-

4. A tax-sheltered annuity plan (section 403 plan).mum Distributions), later, and

• The discussion of IRA beneficiaries later under Treatment of rollovers. You cannot deduct a rolloverWhen Must You Withdraw Assets? (Required Mini- contribution, but you must report the rollover distribution on

your tax return as discussed later under Reporting rollo-mum Distributions).vers from IRAs and Reporting rollovers from employerplans.

Rollover notice. A written explanation of rollover treat-Can You Move Retirement ment must be given to you by the plan (other than an IRA)making the distribution.Plan Assets?Kinds of rollovers from a traditional IRA. You may be

You can transfer, tax free, assets (money or property) from able to roll over, tax free, a distribution from your traditionalother retirement programs (including traditional IRAs) to a IRA into a qualified plan. These plans include the Federal

Thrift Savings Fund (for federal employees), deferred com-traditional IRA. You can make the following kinds of trans-pensation plans of state or local governments (section 457fers.plans), and tax-sheltered annuity plans (section 403(b)

• Transfers from one trustee to another. plans). The part of the distribution that you can roll over isthe part that would otherwise be taxable (includible in your• Rollovers.income). Qualified plans may, but are not required to,

• Transfers incident to a divorce. accept such rollovers.

This chapter discusses all three kinds of transfers. Tax treatment of a rollover from a traditional IRA toan eligible retirement plan other than an IRA. If you roll

Transfers to Roth IRAs. Under certain conditions, you over a distribution from an IRA into an eligible retirementcan move assets from a traditional IRA to a Roth IRA. For plan (defined next) other than an IRA, the part of themore information about these transfers, see Converting distribution you roll over is considered to come first fromFrom Any Traditional IRA Into a Roth IRA, later, and Can amounts other than after-tax contributions in any of yourYou Move Amounts Into a Roth IRA? in chapter 2. traditional IRAs. This means that you can roll over a distri-




bution from an IRA with nontaxable income into a qualified 3. The funds are not deposited into an eligible retire-ment plan within the 60-day rollover period solelyplan if you have enough taxable income in your other IRAsbecause of an error on the part of the financial insti-to cover the nontaxable part. The effect of this is to maketution.the amount in your traditional IRAs that you can roll over to

a qualified plan as large as possible. 4. The funds are deposited into an eligible retirementplan within 1 year from the beginning of the 60-dayEligible retirement plans. The following are consid-rollover period.ered eligible retirement plans.

5. It would have been a valid rollover if the financial• Individual retirement arrangements (IRAs).institution had deposited the funds as instructed.• Qualified trusts.

Other waivers. If you do not qualify for an automatic• Qualified employee annuity plans under sectionwaiver, you can apply to the IRS for a waiver of the 60-day403(a).rollover requirement. You apply by following the proce-• Deferred compensation plans of state and local gov- dures for applying for a letter ruling. Those procedures are

ernments (section 457 plans). stated in a revenue procedure generally published in thefirst Internal Revenue Bulletin of the year. You must also• Tax-sheltered annuities (section 403(b) annuities).pay a user fee with the application. For how to get thatrevenue procedure, see chapter 5.

Time Limit for Making In determining whether to grant a waiver, the IRS willa Rollover Contribution consider all relevant facts and circumstances, including:

You generally must make the rollover contribution by the 1. Whether errors were made by the financial institution60th day after the day you receive the distribution from (other than those described under Automatic waiver,your traditional IRA or your employer’s plan. However, see above),Extension of rollover period, later.

2. Whether you were unable to complete the rolloverThe IRS may waive the 60-day requirement where the due to death, disability, hospitalization, incarceration,

failure to do so would be against equity or good con- restrictions imposed by a foreign country or postalscience, such as in the event of a casualty, disaster, or error,other event beyond your reasonable control.

3. Whether you used the amount distributed (for exam-ple, in the case of payment by check, whether youRollovers completed after the 60-day period. In thecashed the check), andabsence of a waiver, amounts not rolled over within the

60-day period do not qualify for tax-free rollover treatment. 4. How much time has passed since the date of distri-You must treat them as a taxable distribution from either bution.your IRA or your employer’s plan. These amounts aretaxable in the year distributed, even if the 60-day period

Amount. The rules regarding the amount that can beexpires in the next year. You may also have to pay a 10%rolled over within the 60-day time period also apply to theadditional tax on early distributions as discussed lateramount that can be deposited due to a waiver. For exam-under Early Distributions.ple, if you received $6,000 from your IRA, the most that you

Unless there is a waiver or an extension of the 60-day can deposit into an eligible retirement plan due to a waiverrollover period, any contribution you make to your IRA is $6,000.more than 60 days after the distribution is a regular contri-bution, not a rollover contribution. Extension of rollover period. If an amount distributed to

you from a traditional IRA or a qualified employer retire-Example. You received a distribution in late December ment plan is a frozen deposit at any time during the

2003 from a traditional IRA that you do not roll over into 60-day period allowed for a rollover, two special rulesanother traditional IRA within the 60-day limit. You do not extend the rollover period.qualify for a waiver. This distribution is taxable in 2003

1. The period during which the amount is a frozen de-even though the 60-day limit was not up until 2004.posit is not counted in the 60-day period.

Automatic waiver. The 60-day rollover requirement is 2. The 60-day period cannot end earlier than 10 dayswaived automatically only if all of the following apply. after the deposit is no longer frozen.

1. The financial institution receives the funds on your Frozen deposit. This is any deposit that cannot bebehalf before the end of the 60-day rollover period. withdrawn from a financial institution because of either of

the following reasons.2. You followed all the procedures set by the financialinstitution for depositing the funds into an eligible

1. The financial institution is bankrupt or insolvent.retirement plan within the 60-day period (includinggiving instructions to deposit the funds into an eligi- 2. The state where the institution is located restrictsble retirement plan). withdrawals because one or more financial institu-




tions in the state are (or are about to be) bankrupt or tax free only if the property you contribute is the sameinsolvent. property that was distributed to you.

Partial rollovers. If you withdraw assets from a traditionalIRA, you can roll over part of the withdrawal tax free andRollover From One IRA Into Anotherkeep the rest of it. The amount you keep will generally be

You can withdraw, tax free, all or part of the assets from taxable (except for the part that is a return of nondeductibleone traditional IRA if you reinvest them within 60 days in contributions). The amount you keep may be subject to thethe same or another traditional IRA. Because this is a 10% additional tax on early distributions discussed laterrollover, you cannot deduct the amount that you reinvest in under What Acts Result in Penalties or Additional Taxes.an IRA.

Required distributions. Amounts that must be distrib-You may be able to treat a contribution made touted during a particular year under the required distributionone type of IRA as having been made to a differ-rules (discussed later) are not eligible for rollover treat-ent type of IRA. This is called recharacterizing the

TIP

ment.contribution. See Recharacterizations in this chapter formore information.

Inherited IRAs. If you inherit a traditional IRA from yourspouse, you generally can roll it over, or you can choose toWaiting period between rollovers. Generally, if youmake the inherited IRA your own as discussed earliermake a tax-free rollover of any part of a distribution from aunder What If You Inherit an IRA.traditional IRA, you cannot, within a 1-year period, make a

tax-free rollover of any later distribution from that same Not inherited from spouse. If you inherited a tradi-IRA. You also cannot make a tax-free rollover of any tional IRA from someone other than your spouse, youamount distributed, within the same 1-year period, from the cannot roll it over or allow it to receive a rollover contribu-IRA into which you made the tax-free rollover. tion. You must withdraw the IRA assets within a certain

The 1-year period begins on the date you receive the period. For more information, see When Must You With-IRA distribution, not on the date you roll it over into an IRA. draw Assets, later.

Example. You have two traditional IRAs, IRA-1 and Reporting rollovers from IRAs. Report any rollover fromIRA-2. You make a tax-free rollover of a distribution from one traditional IRA to the same or another traditional IRAIRA-1 into a new traditional IRA (IRA-3). You cannot, within on lines 15a and 15b of Form 1040 or on lines 11a and 11b1 year of the distribution from IRA-1, make a tax-free of Form 1040A.rollover of any distribution from either IRA-1 or IRA-3 into Enter the total amount of the distribution on line 15a ofanother traditional IRA. Form 1040 or on line 11a of Form 1040A. If the total

However, the rollover from IRA-1 into IRA-3 does not amount on line 15a of Form 1040 or on line 11a of Formprevent you from making a tax-free rollover from IRA-2 into 1040A was rolled over, enter zero on line 15b of Form 1040any other traditional IRA. This is because you have not, or on line 11b of Form 1040A. If the total distribution waswithin the last year, rolled over, tax-free, any distribution not rolled over, enter the taxable portion of the part thatfrom IRA-2 or made a tax-free rollover into IRA-2. was not rolled over on line 15b of Form 1040 or on line 11b

of Form 1040A. Put “Rollover” next to line 15b, Form 1040Exception. There is an exception to the rule thator line 11b, Form 1040A. See the forms instructions.amounts rolled over tax free into an IRA cannot be rolled

If you rolled over the distribution in 2004 or from an IRAover tax free again within the 1-year period beginning oninto a qualified plan (other than an IRA), attach a statementthe date of the original distribution. The exception appliesexplaining what you did.to a distribution which meets all three of the following

For information on how to figure the taxable portion, seerequirements.Are Distributions Taxable, later.

1. It is made from a failed financial institution by theFederal Deposit Insurance Corporation (FDIC) as re-

Rollover From Employer’s Planceiver for the institution.Into an IRA

2. It was not initiated by either the custodial institutionor the depositor. You can roll over into a traditional IRA all or part of an

eligible rollover distribution you receive from your (or3. It was made because:your deceased spouse’s):

a. The custodial institution is insolvent, and1. Employer’s qualified pension, profit-sharing or stock

b. The receiver is unable to find a buyer for the bonus plan,institution.

2. Annuity plan,

3. Tax-sheltered annuity plan (section 403(b) plan), orThe same property must be rolled over. If property isdistributed to you from an IRA and you complete the 4. Governmental deferred compensation plan (sectionrollover by contributing property to an IRA, your rollover is 457 plan).




A qualified plan is one that meets the requirements of • How the plan receiving the distribution differs fromthe Internal Revenue Code. the plan making the distribution in its restrictions and

tax consequences.Eligible rollover distribution. Generally, an eligible roll-over distribution is any distribution of all or part of the The plan administrator must provide you with this writtenbalance to your credit in a qualified retirement plan except explanation no earlier than 90 days and no later than 30the following. days before the distribution is made.

However, you can choose to have a distribution made1. A required minimum distribution (explained laterless than 30 days after the explanation is provided as longunder When Must You Withdraw Assets? (Requiredas both of the following requirements are met.Minimum Distributions)).

2. A hardship distribution. 1. You are given at least 30 days after the notice isprovided to consider whether you want to elect a3. Any of a series of substantially equal periodic distri-direct rollover.butions paid at least once a year over:

2. You are given information that clearly states that youa. Your lifetime or life expectancy,have this 30-day period to make the decision.

b. The lifetimes or life expectancies of you and yourContact the plan administrator if you have any questionsbeneficiary, orregarding this information.

c. A period of 10 years or more.

Withholding requirement. Generally, if an eligible rollo-4. Corrective distributions of excess contributions or ex-ver distribution is paid directly to you, the payer mustcess deferrals, and any income allocable to the ex-withhold 20% of it. This applies even if you plan to roll overcess, or of excess annual additions and anythe distribution to a traditional IRA. You can avoid withhold-allocable gains.ing by choosing the direct rollover option, discussed later.

5. A loan treated as a distribution because it does notExceptions. The payer does not have to withhold fromsatisfy certain requirements either when made or

an eligible rollover distribution paid to you if either of thelater (such as upon default), unless the participant’sfollowing conditions apply.accrued benefits are reduced (offset) to repay the

loan.1. The distribution and all previous eligible rollover dis-

6. Dividends on employer securities. tributions you received during your tax year from thesame plan (or, at the payer’s option, from all your7. The cost of life insurance coverage.employer’s plans) total less than $200.

8. Generally, a distribution to the plan participant’s ben-2. The distribution consists solely of employer securi-eficiary.

ties, plus cash of $200 or less in lieu of fractionalYour rollover into a traditional IRA may include both shares.

amounts that would be taxable and amounts that would notbe taxable if they were distributed to you, but not rolled The amount withheld is part of the distribution. Ifover. To the extent the distribution is rolled over into a you roll over less than the full amount of thetraditional IRA, it is not includible in your income. distribution, you may have to include in your in-CAUTION

!come the amount you do not roll over. However, you canWritten explanation to recipients. Before making anmake up the amount withheld with funds from othereligible rollover distribution, the administrator of a qualifiedsources.employer plan must provide you with a written explanation.

It must tell you about all of the following. Other withholding rules. The 20% withholding re-quirement does not apply to distributions that are not• Your right to have the distribution paid tax free di-eligible rollover distributions. However, other withholdingrectly to a traditional IRA or another eligible retire-rules apply to these distributions. The rules that applyment plan.depend on whether the distribution is a periodic distribution• The requirement to withhold tax from the distribution or a nonperiodic distribution. For either of these types of

if it is not paid directly to a traditional IRA or another distributions, you can still choose not to have tax withheld.eligible retirement plan. For more information, get Publication 575.

• The tax treatment of any part of the distribution thatyou roll over to a traditional IRA or another eligible Direct rollover option. Your employer’s qualified planretirement plan within 60 days after you receive the must give you the option to have any part of an eligibledistribution. rollover distribution paid directly to a traditional IRA. The

plan is not required to give you this option if your eligible• Other qualified employer plan rules, if they apply,rollover distributions are expected to total less than $200including those for lump-sum distributions, alternatefor the year.payees, and cash or deferred arrangements.




Withholding. If you choose the direct rollover option, could make and deduct these contributions to certain quali-no tax is withheld from any part of the designated distribu- fied employers’ plans and government plans. These aretion that is directly paid to the trustee of the traditional IRA. not the same as an employee’s elective contributions to a

If any part is paid to you, the payer must withhold 20% of 401(k) plan, which are not deductible by the employee.that part’s taxable amount. If you receive a distribution from your employer’s quali-

fied plan of any part of the balance of your DECs and theChoosing an option. Table 1–4 may help you decide earnings from them, you can roll over any part of thewhich distribution option to choose. Carefully compare the distribution.effects of each option.

No waiting period between rollovers. The once-a-yearlimit on IRA-to-IRA rollovers does not apply to eligibleTable 1–4. Comparison of Payment to Yourollover distributions from an employer plan. You can rollVersus Direct Rolloverover more than one distribution from the same employerplan within a year.Result of a Result of a

Affected item payment to you direct rolloverIRA as a holding account (conduit IRA) for rollovers to

The payer must other eligible plans. If you receive an eligible rolloverThere is nowithholding withhold 20% of distribution from your employer’s plan, you can roll overwithholding.the taxable part. part or all of it into one or more conduit IRAs. You can laterroll over those assets into a new employer’s plan. You canIf you are underuse a traditional IRA as a conduit IRA. The conduit IRAage 591/2, a 10%must be made up of only the eligible rollover distributionadditional taxfrom your employer’s plan, plus gains and earnings on themay apply to the There is no 10%assets making up that distribution. A conduit IRA will notaxable part additional tax.additional tax longer qualify if you mix regular contributions or funds from(including an See Earlyother sources with the rollover distribution from youramount equal to Distributions.

the tax withheld) employer’s plan.that is not rolled

Property and cash received in a distribution. If youover.receive both property and cash in an eligible rollover distri-

Any taxable part bution, you can roll over part or all of the property, part or all(including the of the cash, or any combination of the two that you choose.Any taxable parttaxable part of is not income to The same property (or sales proceeds) must bewhen to report any amount you until later rolled over. If you receive property in an eligible rolloveras income withheld) not distributed to yourolled over is distribution from a qualified retirement plan you cannotfrom the IRA.income to you in keep the property and contribute cash to a traditional IRAthe year paid. in place of the property. You must either roll over the

property or sell it and roll over the proceeds, as explainednext.If you decide to roll over any part of a distribution,

the direct rollover option will generally be to your Sale of property received in a distribution from a quali-advantage. This is because you will not have 20%

TIPfied plan. Instead of rolling over a distribution of property

withholding or be subject to the 10% additional tax under other than cash, you can sell all or part of the property andthat option. roll over the amount you receive from the sale (the pro-

If you have a lump-sum distribution and do not plan to ceeds) into a traditional IRA. You cannot keep the propertyroll over any part of it, the distribution may be eligible for and substitute your own funds for property you received.special tax treatment that could lower your tax for thedistribution year. In that case, you may want to see Publi- Example. You receive a total distribution from yourcation 575 and Form 4972, Tax on Lump-Sum Distribu- employer’s plan consisting of $10,000 cash and $15,000tions, and its instructions to determine whether your worth of property. You decide to keep the property. Youdistribution qualifies for special tax treatment and, if so, to can roll over to a traditional IRA the $10,000 cash received,figure your tax under the special methods. but you cannot roll over an additional $15,000 representing

You can then compare any advantages from using the value of the property you choose not to sell.Form 4972 to figure your tax on the lump-sum distribution

Treatment of gain or loss. If you sell the distributedwith any advantages from rolling over all or part of theproperty and roll over all the proceeds into a traditionaldistribution. However, if you roll over any part of theIRA, no gain or loss is recognized. The sale proceedslump-sum distribution, you cannot use the Form 4972(including any increase in value) are treated as part of thespecial tax treatment for any part of the distribution.distribution and are not included in your gross income.

Contributions you made to your employer’s plan.You can roll over a distribution of voluntary deductible Example. On September 2, Mike received a lump-sumemployee contributions (DECs) you made to your distribution from his employer’s retirement plan of $50,000employer’s plan. Prior to January 1, 1987, employees in cash and $50,000 in stock. The stock was not stock of




his employer. On September 24, he sold the stock for More information. For more information about Keogh$60,000. On October 4, he rolled over $110,000 in cash plans, get Publication 560.($50,000 from the original distribution and $60,000 from

Distribution from a tax-sheltered annuity. If you re-the sale of stock). Mike does not include the $10,000 gainceive an eligible rollover distribution from a tax-shelteredfrom the sale of stock as part of his income because heannuity plan (section 403(b) plan), you can roll it over into arolled over the entire amount into a traditional IRA.traditional IRA.

Note. Special rules may apply to distributions of em- Receipt of property other than money. If you receiveployer securities. For more information, get Publication property other than money, you can sell the property and575. roll over the proceeds as discussed earlier.

Partial rollover. If you received both cash and property, Rollover from bond purchase plan. If you redeem re-or just property, but did not roll over the entire distribution, tirement bonds that were distributed to you under a quali-see Rollovers in Publication 575. fied bond purchase plan, you can roll over tax free into a

traditional IRA the part of the amount you receive that isLife insurance contract. You cannot roll over a life insur- more than your basis in the retirement bonds.ance contract from a qualified plan into a traditional IRA.

Reporting rollovers from employer plans. Enter theDistributions received by a surviving spouse. If you total distribution (before income tax or other deductionsreceive an eligible rollover distribution (defined earlier) were withheld) on line 16a of Form 1040 or line 12a offrom your deceased spouse’s eligible retirement plan (de- Form 1040A. This amount should be shown in box 1 offined earlier), you can roll over part or all of it into a Form 1099–R. From this amount, subtract any contribu-traditional IRA. You can also roll over all or any part of a tions (usually shown in box 5 of Form 1099–R) that weredistribution of deductible employee contributions (DECs). taxable to you when made. From that result, subtract the

amount that was rolled over either directly or within 60Distributions under divorce or similar proceedings (al-days of receiving the distribution. Enter the remainingternate payees). If you are the spouse or former spouseamount, even if zero, on line 16b of Form 1040 or line 12bof an employee and you receive a distribution from aof Form 1040A. Also, enter ‘‘Rollover’’ next to line 16b onqualified employer plan as a result of divorce or similarForm 1040 or line 12b of Form 1040A.proceedings, you may be able to roll over all or part of it into

a traditional IRA. To qualify, the distribution must be:Transfers Incident To Divorce

1. One that would have been an eligible rollover distri-bution (defined earlier) if it had been made to the If an interest in a traditional IRA is transferred from youremployee, and spouse or former spouse to you by a divorce or separate

maintenance decree or a written document related to such2. Made under a qualified domestic relations order.a decree, the interest in the IRA, starting from the date ofthe transfer, is treated as your IRA. The transfer is tax free.Qualified domestic relations order. A domestic rela-For information about transfers of interests in employertions order is a judgment, decree, or order (including ap-plans, see Distributions under divorce or similar proceed-proval of a property settlement agreement) that is issuedings (alternate payees) under Rollover From Employer’sunder the domestic relations law of a state. A “qualifiedPlan Into an IRA, earlier.domestic relations order” gives to an alternate payee (a

spouse, former spouse, child, or dependent of a participant Transfer methods. There are two commonly-used meth-in a retirement plan) the right to receive all or part of the ods of transferring IRA assets to a spouse or formerbenefits that would be payable to a participant under the spouse. The methods are:plan. The order requires certain specific information, and itcannot alter the amount or form of the benefits of the plan. 1. Changing the name on the IRA, and

Tax treatment if all of an eligible distribution is not 2. Making a direct transfer of IRA assets.rolled over. Any part of an eligible rollover distribution thatyou keep is taxable in the year you receive it. If you do not Changing the name on the IRA. If all the assets are toroll over any of it, special rules for lump-sum distributions be transferred, you can make the transfer by changing themay apply. See Publication 575. The 10% additional tax on name on the IRA from your name to the name of yourearly distributions, discussed later under What Acts Result spouse or former spouse.in Penalties or Additional Taxes, does not apply.

Direct transfer. Under this method, you direct the trus-Keogh plans and rollovers. If you are self-employed, tee of the traditional IRA to transfer the affected assetsyou are generally treated as an employee for rollover directly to the trustee of a new or existing traditional IRA setpurposes. Consequently, if you receive an eligible rollover up in the name of your spouse or former spouse.distribution from a Keogh plan (a qualified plan with at least If your spouse or former spouse is allowed to keep his orone self-employed participant), you can roll over all or part her portion of the IRA assets in your existing IRA, you canof the distribution (including a lump-sum distribution) into a direct the trustee to transfer the assets you are permitted totraditional IRA. For information on lump-sum distributions, keep directly to a new or existing traditional IRA set up insee Publication 575. your name. The name on the IRA containing your spouse’s




or former spouse’s portion of the assets would then be include in income if you had not converted them into a Rothchanged to show his or her ownership. IRA. You do not include in gross income any part of a

distribution from a traditional IRA that is a return of yourIf the transfer results in a change in the basis ofbasis, as discussed under Are Distributions Taxable, laterthe traditional IRA of either spouse, both spousesin this chapter.must file Form 8606 and follow the directions inCAUTION

!the instructions for that form. If you must include any amount in your gross

income, you may have to increase your withhold-ing or make estimated tax payments. See Publi-CAUTION

!Converting From Any Traditional IRA cation 505, Tax Withholding and Estimated Tax.Into a Roth IRA

RecharacterizationsYou can convert amounts from a traditional IRA into a RothIRA if, for the tax year you make the withdrawal from the

You may be able to treat a contribution made to one type oftraditional IRA, both of the following requirements are met.IRA as having been made to a different type of IRA. This is

1. Your modified AGI for Roth IRA purposes (explained called recharacterizing the contribution.in chapter 2) is not more than $100,000. To recharacterize a contribution, you generally must

have the contribution transferred from the first IRA (the one2. You are not a married individual filing a separateto which it was made) to the second IRA in areturn.trustee-to-trustee transfer. If the transfer is made by thedue date (including extensions) for your tax return for the

Note. If you did not live with your spouse at any time year during which the contribution was made, you canduring the year and you file a separate return, your filing elect to treat the contribution as having been originallystatus, for this purpose, is single. made to the second IRA instead of to the first IRA. If you

recharacterize your contribution, you must do all three ofAllowable conversions. You can withdraw all or part ofthe following.the assets from a traditional IRA and reinvest them (within

60 days) in a Roth IRA. The amount that you withdraw and 1. Include in the transfer any net income allocable totimely contribute (convert) to the Roth IRA is called a the contribution. If there was a loss, the net incomeconversion contribution. If properly (and timely) rolled you must transfer may be a negative amount.over, the 10% additional tax on early distributions will not

2. Report the recharacterization on your tax return forapply.the year during which the contribution was made.You must roll over into the Roth IRA the same property

you received from the traditional IRA. You can roll over part 3. Treat the contribution as having been made to theof the withdrawal into a Roth IRA and keep the rest of it. second IRA on the date that it was actually made toThe amount you keep will generally be taxable (except for the first IRA.the part that is a return of nondeductible contributions) andmay be subject to the 10% additional tax on early distribu-

No deduction allowed. You cannot deduct the contribu-tions. See When Can You Withdraw or Use Assets, latertion to the first IRA. Any net income you transfer with thefor more information on distributions from traditional IRAsrecharacterized contribution is treated as earned in theand Early Distributions, later, for more information on thesecond IRA. The contribution will not be treated as havingtax on early distributions.been made to the second IRA to the extent any deduction

Periodic distributions. If you have started taking sub- was allowed for the contribution to the first IRA.stantially equal periodic payments from a traditional IRA,you can convert the amounts in the traditional IRA to a Conversion by rollover from traditional to Roth IRA.Roth IRA and then continue the periodic payments. The For recharacterization purposes, if you receive a distribu-10% additional tax on early distributions will not apply even tion from a traditional IRA in one tax year and roll it overif the distributions are not qualified distributions (as long as into a Roth IRA in the next year, but still within 60 days ofthey are part of a series of substantially equal periodic the distribution from the traditional IRA, treat it as a contri-payments). bution to the Roth IRA in the year of the distribution from

the traditional IRA.Required distributions. You cannot convert amountsthat must be distributed from your traditional IRA for a

Effect of previous tax-free transfers. If an amount hasparticular year (including the calendar year in which youbeen moved from one IRA to another in a tax-free transfer,reach age 701/2) under the required distribution rules (dis-such as a rollover, you generally cannot recharacterize thecussed in this chapter).amount that was transferred. However, see Traditional IRA

Inherited IRAs. If you inherited a traditional IRA from mistakenly moved to SIMPLE IRA, later.someone other than your spouse, you cannot convert it to Recharacterizing to a SEP-IRA or SIMPLE IRA. Rotha Roth IRA.

IRA conversion contributions from a SEP-IRA or SIMPLEIRA can be recharacterized to a SEP-IRA or SIMPLE IRAIncome. You must include in your gross income distribu-(including the original SEP-IRA or SIMPLE IRA).tions from a traditional IRA that you would have had to




Traditional IRA mistakenly moved to SIMPLE IRA. If tion is required if both IRAs are maintained by the sameyou mistakenly roll over or transfer an amount from a trustee. The notification(s) must include all of the followingtraditional IRA to a SIMPLE IRA, you can later recharacter- information.ize the amount as a contribution to another traditional IRA. • The type and amount of the contribution to the first

IRA that is to be recharacterized.Recharacterizing excess contributions. You canrecharacterize only actual contributions. If you are apply- • The date on which the contribution was made to theing excess contributions for prior years as current contribu- first IRA and the year for which it was made.tions, you can recharacterize them only if the

• A direction to the trustee of the first IRA to transfer inrecharacterization would still be timely with respect to thea trustee-to-trustee transfer the amount of the contri-tax year for which the applied contributions were actuallybution and any net income (or loss) allocable to themade.contribution to the trustee of the second IRA.

Example. You contributed more than you were entitled • The name of the trustee of the first IRA and theto in 2003. You cannot recharacterize the excess contribu- name of the trustee of the second IRA.tions you made in 2003 after April 15, 2004, because

• Any additional information needed to make thecontributions after that date are no longer timely for 2003.transfer.

Recharacterizing employer contributions. You cannotrecharacterize employer contributions (including elective In most cases, the net income you must transfer isdeferrals) under a SEP or SIMPLE plan as contributions to determined by your IRA trustee or custodian. If you need toanother IRA. SEPs are discussed in Publication 560. determine the applicable net income on IRA contributionsSIMPLE plans are discussed in chapter 3. made during 2002 and 2003 that were recharacterized,

you can use Notice 2000–39, section 1.408A-5, A-2(c) ofRecharacterization not counted as rollover. Thethe proposed regulations, or Worksheet 1–3 adjusted forrecharacterization of a contribution is not treated as athe appropriate dates. If you are determining net incomerollover for purposes of the 1-year waiting period describedon IRA contributions made after 2003 that are recharacter-earlier in this chapter under Rollover From One IRA Intoized, use Worksheet 1–3. See section 1.408A-5 of theAnother. This is true even if the contribution would haveregulations for more information.been treated as a rollover contribution by the second IRA if

it had been made directly to the second IRA rather than asWorksheet 1–3. Determining the Amount ofa result of a recharacterization of a contribution to the firstNet Income Due To an IRA Contribution andIRA.Total Amount To Be Recharacterized

Reconversions 1. Enter the amount of your IRAcontribution for 2004 to beYou cannot convert and reconvert an amount during the recharacterized. . . . . . . . . . . . . . . . . . 1.

same taxable year or, if later, during the 30-day period 2. Enter the fair market value of the IRAfollowing a recharacterization. If you reconvert during ei- immediately prior to thether of these periods, it will be a failed conversion. recharacterization (include any

distributions, transfers, orExample. If you convert an amount from a traditional recharacterization made while the

IRA to a Roth IRA and then transfer that amount back to a contribution was in the account). . . . . 2.traditional IRA in a recharacterization in the same year, 3. Enter the fair market value of the IRAyou may not reconvert that amount from the traditional IRA immediately prior to the time theto a Roth IRA before: contribution being recharacterized

was made, including the amount of• The beginning of the year following the year in whichsuch contribution and any otherthe amount was converted to a Roth IRA or, if later,contributions, transfers, or

• The end of the 30-day period beginning on the day recharacterizations made while theon which you transfer the amount from the Roth IRA contribution was in the account . . . . . 3.back to a traditional IRA in a recharacterization. 4. Subtract line 3 from line 2 . . . . . . . . . . 4.

5. Divide line 4 by line 3. Enter the resultas a decimal (rounded to at least threeHow Do You Recharacterize a Contribution? places). . . . . . . . . . . . . . . . . . . . . . . . 5.

6. Multiply line 1 by line 5. This is the netTo recharacterize a contribution, you must notify both theincome attributable to the contributiontrustee of the first IRA (the one to which the contributionto be recharacterized.. . . . . . . . . . . . . 6.was actually made) and the trustee of the second IRA (the

7. Add lines 1 and 6. This is the amountone to which the contribution is being moved) that youof the IRA contribution plus the nethave elected to treat the contribution as having been madeincome attributable to it to beto the second IRA rather than the first. You must make the recharacterized. . . . . . . . . . . . . . . . . . 7.

notifications by the date of the transfer. Only one notifica-




Example. On March 1, 2004, when her Roth IRA is1. Your return was timely filed for the year the choiceworth $80,000, Allison makes a $160,000 conversion con-

should have been made, andtribution to the Roth IRA. Subsequently, Allison discoversthat she was ineligible to make a Roth conversion contribu- 2. You take appropriate corrective action within 6tion in 2004 and so she requests that the $160,000 be months from the due date of your return excludingrecharacterized to a traditional IRA. Pursuant to this re- extensions. For returns due April 15, 2004, this pe-quest, on March 1, 2005, when the IRA is worth $225,000, riod ends on October 15, 2004.the Roth IRA trustee transfers to a traditional IRA the

Appropriate corrective action consists of:$160,000 plus allocable net income. No other contributionshave been made to the Roth IRA and no distributions have 1. Notifying the trustee(s) of your intent to recharacter-been made. ize,

The adjusted opening balance is $240,000 ($80,000 +2. Providing the trustee with all necessary information,$160,000) and the adjusted closing balance is $225,000.

andThus the net income allocable to the $160,000 is ($10,000)($160,000 x (($225,000 – $240,000) ÷ $240,000). There- 3. Having the trustee transfer the contribution.fore in order to recharacterize the March 1, 2004, $160,000

Once this is done, you must amend your return to show theconversion contribution on March 1, 2005, the Roth IRArecharacterization. You have until the regular due date fortrustee must transfer from Allison’s Roth IRA to her tradi-amending a return to do this. Report the recharacterizationtional IRA $150,000 ($160,000 – $10,000). This is shownon the amended return and write “Filed pursuant to sectionon the following worksheet.301.9100–2” on the return. File the amended return at thesame address you filed the original return.

Worksheet 1–3. Example—IllustratedDecedent. The election to recharacterize can be made

on behalf of a deceased IRA owner by the executor,1. Enter the amount of your IRAadministrator, or other person responsible for filing thecontribution for 2004 to bedecedent’s final income tax return.recharacterized. . . . . . . . . . . . . . . . . . 1. 160,000

2. Enter the fair market value of the IRAElection cannot be changed. After the transfer hasimmediately prior to thetaken place, you cannot change your election torecharacterization (include anyrecharacterize.distributions, transfers, or

recharacterization made while theSame trustee. Recharacterizations made with the samecontribution was in the account). . . . . 2. 225,000trustee can be made by redesignating the first IRA as the3. Enter the fair market value of the IRAsecond IRA, rather than transferring the account balance.immediately prior to the time the

contribution being recharacterizedwas made, including the amount of Reporting a Recharacterizationsuch contribution and any othercontributions, transfers, or If you elect to recharacterize a contribution to one IRA as arecharacterizations made while the contribution to another IRA, you must report thecontribution was in the account . . . . . 3. 240,000 recharacterization on your tax return as directed by Form

4. Subtract line 3 from line 2. . . . . . . . . . 4. (15,000) 8606 and its instructions. You must treat the contribution5. Divide line 4 by line 3. Enter the result as having been made to the second IRA.

as a decimal (rounded to at least threeplaces).. . . . . . . . . . . . . . . . . . . . . . . . 5. (.0625) Example. On June 1, 2003, Christine properly and

6. Multiply line 1 by line 5. This is the net timely converted her traditional IRAs to a Roth IRA. At theincome attributable to the contribution time, she and her husband, Lyle, expected to have modi-to be recharacterized. . . . . . . . . . . . . 6. (10,000) fied AGI of less than $100,000 for 2003. In December, Lyle

7. Add lines 1 and 6. This is the amount received an unexpected bonus that increased his andof the IRA contribution plus the net Christine’s modified AGI to more than $100,000. In Janu-income attributable to it to be

ary 2004, to make the necessary adjustment to remove therecharacterized. . . . . . . . . . . . . . . . . . 7. 150,000unallowable conversion, Christine set up a traditional IRAwith the same trustee. Also in January 2004, she instructedthe trustee of the Roth IRA to make a trustee-to-trusteeTiming. The election to recharacterize and the transfertransfer of the conversion contribution made to the Rothmust both take place on or before the due date (includingIRA (including net income allocable to it since the conver-extensions) for filing your tax return for the year for whichsion) to the new traditional IRA. She also notified thethe contribution was made to the first IRA.trustee that she was electing to recharacterize the contri-

Extension. Ordinarily you must choose to recharacter- bution to the Roth IRA and treat it as if it had beenize a contribution by the due date of the return or the due contributed to the new traditional IRA. Because of thedate plus extensions. However, if you miss this deadline, recharacterization, Lyle and Christine have no taxableyou can still recharacterize a contribution if: income from the conversion to report for 2003, and the




resulting rollover to a traditional IRA is not treated as arollover for purposes of the one-rollover-per-year rule. Worksheet 1–4. Determining the Amount ofMore than one IRA. If you have more than one IRA, figure Net Income Due To an IRA Contribution andthe amount to be recharacterized only on the account from Total Amount To Be Withdrawn From thewhich you withdraw the contribution.

IRA

1. Enter the amount of your IRAWhen Can You Withdraw or contribution for 2004 to be returned toyou. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.Use Assets? 2. Enter the fair market value of the IRAimmediately prior to the removal of the

You can withdraw or use your traditional IRA assets at any contribution, plus the amount of anytime. However, a 10% additional tax generally applies if distributions, transfers, andyou withdraw or use IRA assets before you are age 591/2. recharacterizations made while theThis is explained under Age 591/2 Rule under Early Distri- contribution was in the IRA. . . . . . . . . 2.butions, later. 3. Enter the fair market value of the IRA

You generally can make a tax-free withdrawal of contri- immediately before the contributionbutions if you do it before the due date for filing your tax was made, plus the amount of suchreturn for the year in which you made them. This means contribution and any otherthat, even if you are under age 591/2, the 10% additional tax contributions, transfers, andmay not apply. These withdrawals are explained next. recharacterizations made while the

contribution was in the IRA . . . . . . . . . 3.4. Subtract line 3 from line 2. . . . . . . . . . 4.Contributions Returned5. Divide line 4 by line 3. Enter the resultBefore Due Date of Return as a decimal (rounded to at least three

places).. . . . . . . . . . . . . . . . . . . . . . . . 5.If you made IRA contributions in 2003, you can withdraw6. Multiply line 1 by line 5. This is the netthem tax free by the due date of your return. If you have an

income attributable to the contributionextension of time to file your return, you can withdraw them to be returned. . . . . . . . . . . . . . . . . . . 6.tax free by the extended due date. You can do this if, for

7. Add lines 1 and 6. This is the amounteach contribution you withdraw, both of the following con- of the IRA contribution plus the netditions apply. income attributable to it to be returned

to you. . . . . . . . . . . . . . . . . . . . . . . . . 7.1. You did not take a deduction for the contribution.

2. You withdraw any interest or other income earned onthe contribution. You can take into account any loss Example. On May 1, 2004, when her IRA is worthon the contribution while it was in the IRA when $4,800, Cathy makes a $1,600 regular contribution to hercalculating the amount that must be withdrawn. If IRA. Cathy requests that $400 of the May 1, 2004, contri-there was a loss, the net income earned on the bution be returned to her. On February 1, 2005, when thecontribution may be a negative amount. IRA is worth $7,600, the IRA trustee distributes to Cathy

In most cases, the net income you must withdraw is the $400 plus net income attributable to the contribution.determined by the IRA trustee or custodian. If you need to No other contributions have been made to the IRA for 2004determine the applicable net income on IRA contributions and no distributions have been made.made during 2002 and 2003 that were returned to you, you

The adjusted opening balance is $6,400 ($4,800 +can use Notice 2000–39, section 1.408–4(c) of the pro-$1,600) and the adjusted closing balance is $7,600. Theposed regulations, or Worksheet 1–4 adjusted for thenet income due to the May 1, 2004, contribution is $75appropriate dates. If you are determining net income on($400 x ($7,600 – $6,400) ÷ $6,400)). Therefore, the totalIRA contributions made after 2003 that are returned to you,to be distributed on February 1, 2005, is $475. This isuse Worksheet 1–4. See section 1.408–11 of the regula-shown on the following worksheet.tions for more information.




Worksheet 1–4. Example—Illustrated Excess Contributions Tax

If any part of these contributions is an excess contribution1. Enter the amount of your IRAfor 2002, it is subject to a 6% excise tax. You will not havecontribution for 2004 to be returned toto pay the 6% tax if any 2002 excess contribution wasyou. . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 400withdrawn by April 15, 2003 (plus extensions), and if any2. Enter the fair market value of the IRA2003 excess contribution is withdrawn by April 15, 2004immediately prior to the removal of the

contribution, plus the amount of any (plus extensions). See Excess Contributions under Whatdistributions, transfers, and Acts Result in Penalties or Additional Taxes, later.recharacterizations made while the

You may be able to treat a contribution made tocontribution was in the IRA. . . . . . . . . 2. 7,600one type of IRA as having been made to a differ-3. Enter the fair market value of the IRAent type of IRA. This is called recharacterizing the

TIPimmediately before the contribution

contribution. See Recharacterizations earlier for more in-was made, plus the amount of suchformation.contribution and any other

contributions, transfers, andrecharacterizations made while thecontribution was in the IRA . . . . . . . . . 3. 6,400 When Must You Withdraw4. Subtract line 3 from line 2. . . . . . . . . . 4. 1,200

5. Divide line 4 by line 3. Enter the result Assets? (Required Minimumas a decimal (rounded to at least threeplaces). . . . . . . . . . . . . . . . . . . . . . . . 5. .1875 Distributions)

6. Multiply line 1 by line 5. This is the netincome attributable to the contribution You cannot keep funds in a traditional IRA indefinitely.to be returned. . . . . . . . . . . . . . . . . . . 6. 75 Eventually they must be distributed. If there are no distri-

7. Add lines 1 and 6. This is the amount butions, or if the distributions are not large enough, youof the IRA contribution plus the net may have to pay a 50% excise tax on the amount notincome attributable to it to be returned distributed as required. See Excess Accumulations, laterto you. . . . . . . . . . . . . . . . . . . . . . . . . 7. 475 under What Acts Result in Penalties or Additional Taxes.

The requirements for distributing IRA funds differ, depend-ing on whether you are the IRA owner or the beneficiary ofLast-in first-out rule. If you made more than one regulara decedent’s IRA.contribution for the year, your last contribution is consid-

ered to be the one that is returned to you first.Required minimum distribution. The amount that mustbe distributed each year is referred to as the required

Earnings Includible in Income minimum distribution.

You must include in income any earnings on the contribu- Distributions not eligible for rollover. Amounts thattions you withdraw. Include the earnings in income for the must be distributed (required minimum distributions) dur-year in which you made the contributions, not the year in ing a particular year are not eligible for rollover treat-which you withdraw them. ment.

Generally, except for any part of a withdrawal thatIRA Ownersis a return of nondeductible contributions (basis),

any withdrawal of your contributions after the dueCAUTION!

If you are the owner of a traditional IRA, you must startdate (or extended due date) of your return will be treated asreceiving distributions from your IRA by April 1 of the yeara taxable distribution. Another exception is the return of anfollowing the year in which you reach age 701/2. April 1 ofexcess contribution as discussed under What Acts Resultthe year following the year in which you reach age 701/2 isin Penalties or Additional Taxes, later.referred to as the required beginning date.

Distributions by the required beginning date. YouEarly Distributions Taxmust receive at least a minimum amount for each yearstarting with the year you reach age 701/2 (your 701/2 year).The 10% additional tax on distributions made before youIf you do not (or did not) receive that minimum amount inreach age 591/2 does not apply to these tax-free withdraw-your 701/2 year, then you must receive distributions for yourals of your contributions. However, the distribution of inter-701/2 year by April 1 of the next year.est or other income must be reported on Form 5329 and,

If an IRA owner dies after reaching age 701/2, but beforeunless the distribution qualifies as an exception to the ageApril 1 of the next year, no minimum distribution is required591/2 rule, it will be subject to this tax. See Early Distribu-because death occurred before the required beginningtions under What Acts Result in Penalties or Additionaldate.Taxes, later.




Even if you begin receiving distributions before the beneficiary designation on the IRA during that sameyou reach age 701/2, you must begin calculating year, your former spouse will not be treated as the soleand receiving required minimum distributions by beneficiary for that year.CAUTION

!your required beginning date.

Figuring the Owner’s Required MinimumMore than minimum received. If, in any year, youreceive more than the required minimum distribution for Distributionthat year, you will not receive credit for the additional

Figure your required minimum distribution for each year byamount when determining the minimum required distribu-dividing the IRA account balance (defined next) as of thetions for future years. This does not mean that you do notclose of business on December 31 of the preceding yearreduce your IRA account balance. It means that if youby the applicable distribution period or life expectancy.receive more than your required minimum distribution in

one year, you cannot treat the excess (the amount that is IRA account balance. The IRA account balance is themore than the required minimum distribution) as part of amount in the IRA at the end of the year preceding the yearyour required minimum distribution for any later year. How- for which the required minimum distribution is being fig-ever, any amount distributed in your 701/2 year will be ured.credited toward the amount that must be distributed by

Contributions. Contributions increase the account bal-April 1 of the following year.ance in the year they are made. If a contribution for last

Distributions after the required beginning date. The year is not made until after December 31 of last year, itrequired minimum distribution for any year after the year increases the account balance for this year, but not for lastyou turn 701/2 must be made by December 31 of that later year. Disregard contributions made after December 31 ofyear. last year in determining your required minimum distribution

for this year.Example. You reach age 701/2 on August 20, 2003. For

Outstanding rollovers and recharacterizations. The2003, you must receive the required minimum distributionIRA account balance is adjusted by outstanding rolloversfrom your IRA by April 1, 2004. You must receive theand recharacterizations of Roth IRA conversions that arerequired minimum distribution for 2004 by December 31,not in any account at the end of the preceding year.2004.

For a rollover from a qualified plan or another IRA thatIf you do not receive your required minimum dis- was not in any account at the end of the preceding year,tribution for 2003 until 2004, both your 2003 and increase the account balance of the receiving IRA by theyour 2004 distributions will be includible on yourCAUTION

!rollover amount valued as of the date of receipt.

2004 return. If a conversion contribution or failed conversion contri-bution is contributed to a Roth IRA and that amount (plus

Distributions from individual retirement account. If net income allocable to it) is transferred to another IRA in ayou are the owner of a traditional IRA that is an individual subsequent year as a recharacterized contribution, in-retirement account, you or your trustee must figure the crease the account balance of the receiving IRA by therequired minimum distribution for each year. See Figuring recharacterized contribution (plus allocable net income) forthe Owner’s Required Minimum Distribution, later. the year in which the conversion or failed conversion oc-

curred.Distributions from individual retirement annuities. Ifyour traditional IRA is an individual retirement annuity, Distributions. Distributions reduce the account bal-special rules apply to figuring the required minimum distri- ance in the year they are made. If a distribution for last yearbution. For more information on rules for annuities, get is not made until after December 31 of last year, it reducessection 1.401(a)(9)–6T of the regulations. These tempo- the account balance for this year, but not for last year.rary regulations can be read in many libraries and IRS Disregard distributions made after December 31 of lastoffices. year in determining your required minimum distribution for

this year.Change in marital status. For purposes of figuring yourrequired minimum distribution, your marital status is deter- Example 1. Laura was born on October 1, 1933. She ismined as of January 1 of each year. If you are married on

an unmarried participant in a qualified defined contributionJanuary 1, but get divorced or your spouse dies during theplan. She reaches age 701/2 in 2004. Her required begin-year, your spouse as of January 1 remains your solening date is April 1, 2005. As of December 31, 2003, herbeneficiary for that year. For purposes of determining youraccount balance was $26,500. No rollover or recharacter-distribution period, a change in beneficiary is effective inization amounts were outstanding. Using Table III in Ap-the year following the year of death or divorce.pendix C, the applicable distribution period for someone

Change of beneficiary. If your spouse is the sole bene- her age (71) is 26.5 years. Her required minimum distribu-ficiary of your IRA, and he or she dies before you, your tion for 2004 is $1,000 ($26,500 ÷ 26.5). That amount isspouse will not fail to be your sole beneficiary for the year distributed to her on April 1, 2005.that he or she died solely because someone other thanyour spouse is named a beneficiary for the rest of that year. Example 2. Joe, born October 1, 1932, reached 701/2 inHowever, if you get divorced during the year and change 2003. His wife (his beneficiary) turned 56 in September




2003. He must begin receiving distributions by April 1, Example. You own a traditional IRA. Your account bal-2004. Joe’s IRA account balance as of December 31, ance at the end of 2003 was $100,000. You are married2002, is $30,100. Because Joe’s wife is more than 10 and your spouse, who is the sole beneficiary of your IRA, isyears younger than Joe and is the sole beneficiary of his 11 years younger than you. You turn 75 in 2004 and yourIRA, Joe uses Table II in Appendix C. Based on their ages spouse turns 64. You use Table II. Your joint life and lastat year end (December 31, 2003), the joint life expectancy survivor expectancy is 23.6. Your required minimum distri-for Joe (age 71) and his wife (age 56) is 30.1 years. The bution for 2004 is $4,237 ($100,000 ÷ 23.6).required minimum distribution for 2003, Joe’s first distribu-

Distributions in the year of the owner’s death. Thetion year (his 701/2 year), is $1,000 ($30,100 ÷ 30.1). Thisrequired minimum distribution for the year of the owner’samount is distributed to Joe on April 1, 2004.death depends on whether the owner died before therequired beginning date.Distribution period. This is the maximum number of

years over which you are allowed to take distributions from If the owner died before the required beginning date,the IRA. The period to use for 2004 is listed next to your see Owner Died Before Required Beginning Date, laterage as of your birthday in 2004 in Table III in Appendix C. under IRA Beneficiaries.

If the owner died on or after the required beginning date,Life expectancy. If you must use Table I, your life expec- the required minimum distribution for the year of deathtancy for 2004 is listed in the table next to your age as of generally is based on Table III (Uniform Lifetime) in Appen-your birthday in 2004. If you use Table II, your life expec- dix C. However, if the sole beneficiary of the IRA is thetancy is listed where the row or column containing your age owner’s spouse who is more than 10 years younger thanas of your birthday in 2004 intersects with the row or the owner, use the life expectancy from Table II (Joint Lifecolumn containing your spouse’s age as of his or her and Last Survivor Expectancy).birthday in 2004. Both Table I and Table II are in AppendixC. Note. You figure the required minimum distribution for

the year in which an IRA owner dies as if the owner lived forDistributions during your lifetime. Required minimum the entire year.distributions during your lifetime are based on a distributionperiod that generally is determined using Table III (Uniform IRA BeneficiariesLifetime) in Appendix C. However, if the sole beneficiary ofyour IRA is your spouse who is more than 10 years The rules for determining required minimum distributionsyounger than you, see Sole beneficiary spouse who is for beneficiaries depend on whether the beneficiary is anmore than 10 years younger, later. individual. The rules for individuals are explained below. If

To figure the required minimum distribution for 2004, the owner’s beneficiary is not an individual (for example, ifdivide your account balance at the end of 2003 by the the beneficiary is the owner’s estate), see Beneficiary notdistribution period from the table. This is the distribution an individual, later.period listed next to your age (as of your birthday in 2004)in Table III in Appendix C, unless the sole beneficiary of Surviving spouse. If you are a surviving spouse who isyour IRA is your spouse who is more than 10 years the sole beneficiary of your deceased spouse’s IRA, youyounger than you. may elect to be treated as the owner and not as the

beneficiary. If you elect to be treated as the owner, youExample. You own a traditional IRA. Your account bal- determine the required minimum distribution (if any) as if

ance at the end of 2003 was $100,000. You are married you were the owner beginning with the year you elect orand your spouse, who is the sole beneficiary of your IRA, is are deemed to be the owner. However, if you become the6 years younger than you. You turn 75 years old in 2004. owner in the year your deceased spouse died, you are notYou use Table III. Your distribution period is 22.9. Your required to determine the required minimum distribution forrequired minimum distribution for 2004 is $4,367 that year using your life; rather, you can take the deceased($100,000 ÷ 22.9). owner’s required minimum distribution for that year (to the

extent it was not already distributed to the owner before hisSole beneficiary spouse who is more than 10 yearsor her death).younger. If the sole beneficiary of your IRA is your spouse

and your spouse is more than 10 years younger than you,Taking balance within 5 years. A beneficiary who is anuse the life expectancy from Table II (Joint Life and Lastindividual may be required to take the entire account by theSurvivor Expectancy).end of the fifth year following the year of the owner’s death.The life expectancy to use is the joint life and lastIf this rule applies, no distribution is required for any yearsurvivor expectancy listed where the row or column con-before that fifth year.taining your age as of your birthday in 2004 intersects with

the row or column containing your spouse’s age as of his orher birthday in 2004. Owner Died On or After Required Beginning

You figure your required minimum distribution for 2004 Dateby dividing your account balance at the end of 2003 by thelife expectancy from Table II (Joint Life and Last Survivor If the owner died on or after his or her required beginningExpectancy) in Appendix C. date, and you are the designated beneficiary, you gener-




ally must base required minimum distributions for years • Spouse as sole designated beneficiary. Use theafter the year of the owner’s death on the longer of:

life expectancy listed in the table next to the• Your single life expectancy as shown on Table I, or spouse’s age (as of the spouse’s birthday in 2004). If

the owner died before the year in which he or she• The owner’s life expectancy as determined underreached age 701/2, distributions to the spouse do notDeath on or after required beginning date, underneed to begin until the year in which the ownerBeneficiary not an individual, later.would have reached age 701/2.

• Other designated beneficiary. Use the life expec-Owner Died Before Required Beginning Datetancy listed in the table next to the beneficiary’s ageas of his or her birthday in the year following theIf the owner died before his or her required beginning date,year of the owner’s death, reduced by one for eachbase required minimum distributions for years after theyear since the year following the owner’s death.year of the owner’s death generally on your single life

expectancy.If the owner’s beneficiary is not an individual (for exam- Example. Your father died in 2003. You are the desig-

ple, if the beneficiary is the owner’s estate), see Benefi-nated beneficiary of your father’s traditional IRA. You areciary not an individual, later.53 years old in 2004. You use Table I and see that your life

Date the designated beneficiary is determined. Gener- expectancy in 2004 is 31.4. If the IRA was worth $100,000ally, the designated beneficiary is determined on Septem- at the end of 2003, your required minimum distribution forber 30 of the calendar year following the calendar year of 2004 is $3,185 ($100,000 ÷ 31.4). If the value of the IRA atthe IRA owner’s death. In order to be a designated benefi- the end of 2004 was again $100,000, your required mini-ciary, an individual must be a beneficiary as of the date of mum distribution for 2005 would be $3,289 ($100,000 ÷death. Any person who was a beneficiary on the date of the 30.4). Instead of taking yearly distributions, you couldowner’s death, but is not a beneficiary on September 30 of choose to take the entire distribution in 2008 or earlier.the calendar year following the calendar year of theowner’s death (because, for example, he or she disclaimed Beneficiary not an individual. If the beneficiary is not anentitlement or received his or her entire benefit), will not be individual, determine the required minimum distribution fortaken into account in determining the designated benefi- 2004 as follows.ciary.

• Death on or after required beginning date. DivideDeath of a beneficiary. If a person who is a beneficiarythe account balance at the end of 2003 by the ap-as of the owner’s date of death dies before September 30propriate life expectancy from Table I (Single Lifeof the year following the year of the owner’s death withoutExpectancy) in Appendix C. Use the life expectancydisclaiming entitlement to benefits, that individual, ratherlisted next to the owner’s age as of his or her birth-than his or her successor beneficiary, continues to beday in the year of death, reduced by one for eachtreated as a beneficiary for determining the distributionyear since the year of death.period.

• Death before required beginning date. The entireDeath of surviving spouse. If the designated beneficiaryaccount must be distributed by the end of the fifthis the owner’s surviving spouse, and he or she dies beforeyear following the year of the owner’s death. Nohe or she was required to begin receiving distributions, thedistribution is required for any year before that fifthsurviving spouse will be treated as if he or she were theyear.owner of the IRA. However, this rule does not apply to the

surviving spouse of a surviving spouse.

Example. The owner died in 2003 at the age of 80. TheMore than one beneficiary. If an IRA has more than oneowner’s traditional IRA went to his estate. The accountbeneficiary or a trust is named as beneficiary, see Miscel-

laneous Rules for Required Minimum Distributions, later. balance at the end of 2003 was $100,000. In 2004, therequired minimum distribution was $10,870 ($100,000 ÷9.2). (The owner’s life expectancy in the year of death,Figuring the Beneficiary’s Required 10.2, reduced by one.) If the owner had died in 2003 at the

Minimum Distribution age of 70, the entire account would have to be distributedby the end of 2008.How you figure the required minimum distribution depends

on whether the beneficiary is an individual or some otherWhich Table Do You Useentity, such as a trust or estate.

To Determine YourBeneficiary an individual. If the beneficiary is an individ-ual, to figure the required minimum distribution for 2004, Required Minimum Distribution?divide the account balance at the end of 2003 by the

There are three different tables. You use only one of themappropriate life expectancy from Table I (Single Life Ex-to determine your required minimum distribution for eachpectancy) in Appendix C. Determine the appropriate lifetraditional IRA. Determine which one to use as follows.expectancy as follows.




Reminder. In using the tables for lifetime distributions, What Age(s) Do You Use With themarital status is determined as of January 1 each year. Table(s)?Divorce or death after January 1 is generally disregardeduntil the next year. However, if you divorce and change the The age or ages to use with each table are explainedbeneficiary designation in the same year, your former below.spouse cannot be considered your sole beneficiary for that

Table I (Single Life Expectancy). If you are a designatedyear.beneficiary figuring your first distribution, use your age asof your birthday in the year distributions must begin. This is

Table I (Single Life Expectancy). Use Table I for years usually the calendar year immediately following the calen-after the year of the owner’s death if either of the following dar year of the owner’s death. If you are the owner’sapply. surviving spouse and the sole designated beneficiary, this

is the year in which the owner would have reached age1. You are an individual and a designated beneficiary, 701/2. After the first distribution year, reduce your life expec-

but not both the owner’s surviving spouse and sole tancy by one for each subsequent year.designated beneficiary.

Example. You are the owner’s designated beneficiary2. You are not an individual and the owner died on orfiguring your first required minimum distribution. Distribu-after the required beginning date.tions must begin in 2004. You become 57 years old in2004. You use Table I. Your distribution period for 2004 is

Surviving spouse. If you are the owner’s surviving 27.9 years. Your distribution period for 2005 is 26.9 (27.9 −spouse and sole designated beneficiary, and the owner 1). Your distribution period for 2006 is 25.9 (27.9 − 2).had not reached age 701/2 when he or she died, and you do

No designated beneficiary. In some cases, you neednot elect to be treated as the owner of the IRA, you do notto use the owner’s life expectancy. You need to use it whenhave to take distributions (and use Table I) until the year inthe owner dies on or after the required beginning date andwhich the owner would have reached age 701/2.there is no designated beneficiary as of September 30 ofthe year following the year of the owner’s death. In this

Table II (Joint Life and Last Survivor Expectancy). Use case, use the owner’s life expectancy for his or her age asTable II if you are the IRA owner and your spouse is both of the owner’s birthday in the year of death and reduce it byyour sole designated beneficiary and more than 10 years one for each subsequent year.younger than you.

Table II (Joint Life and Last Survivor Expectancy). Foryour first distribution by the required beginning date, useNote. Use this table in the year of the owner’s death ifyour age and the age of your designated beneficiary as ofthe owner died after the required beginning date and this isyour birthdays in the year you become age 701/2. Yourthe table that would have been used had he or she notcombined life expectancy is at the intersection of yourdied.ages.

If you are figuring your required minimum distribution forTable III (Uniform Lifetime). Use Table III if you are the 2004, use your ages as of your birthdays in 2004. For eachIRA owner and your spouse is not both the sole designated subsequent year, use your and your spouse’s ages as ofbeneficiary of your IRA and more than 10 years younger your birthdays in the subsequent year.than you.

Table III (Uniform Lifetime). For your first distribution byyour required beginning date, use your age as of yourNote. Use this table in the year of the owner’s death ifbirthday in the year you become age 701/2.the owner died after the required beginning date and this is

If you are figuring your required minimum distribution forthe table that would have been used had he or she not2004, use your age as of your birthday in 2004. For eachdied.subsequent year, use your age as of your birthday in thesubsequent year.

No table. Do not use any of the tables if the designatedbeneficiary is not an individual and the owner died before Miscellaneous Rules forthe required beginning date. In this case, the entire distri-

Required Minimum Distributionsbution must be made by the end of the fifth year followingthe year of the IRA owner’s death.

The following rules may apply to you.This rule also applies if there is no designated benefi-

ciary named by September 30 of the year following the Installments allowed. The yearly required minimum dis-tribution can be taken in a series of installments (monthly,year of the IRA owner’s death.quarterly, etc.) as long as the total distributions for the year5-year rule. If you are an individual, you can elect to are at least as much as the minimum required amount.

take the entire account by the end of the fifth year followingthe year of the owner’s death. If you make this election, do More than one IRA. If you have more than one traditionalnot use a table. IRA, you must determine a separate required minimum




distribution for each IRA. However, you can total these accounts are not combined for required minimum distribu-minimum amounts and take the total from any one or more tion purposes until the year after the separate accounts areof the IRAs. established, or if later, the date of death. As a general rule,

the required minimum distribution rules separately apply toExample. Sara, born August 1, 1932, became 701/2 on each account. However, the distribution period for an ac-

February 1, 2003. She has two traditional IRAs. She must count is separately determined (disregarding beneficiariesbegin receiving her IRA distributions by April 1, 2004. On of the other account(s)) only if the account was set up byDecember 31, 2002, Sara’s account balance from IRA A the end of the year following the year of the owner’s death.was $10,000; her account balance from IRA B was The separate account rules cannot be used by benefi-$20,000. Sara’s brother, age 64 as of his birthday in 2003, ciaries of a trust.is the beneficiary of IRA A. Her husband, age 78 as of his

Trust as beneficiary. A trust cannot be a designatedbirthday in 2003, is the beneficiary of IRA B.beneficiary even if it is a named beneficiary. However, theSara’s required minimum distribution from IRA A is $377beneficiaries of a trust will be treated as having been($10,000 ÷ 26.5 (the distribution period for age 71 perdesignated as beneficiaries if all of the following are true.Table III)). The amount of the required minimum distribu-

tion from IRA B is $755 ($20,000 ÷ 26.5). The amount that 1. The trust is a valid trust under state law, or would bemust be withdrawn by Sara from her IRA accounts by April but for the fact that there is no corpus.1, 2004, is $1,132 ($377 + $755).

2. The trust is irrevocable or will, by its terms, becomeMore than minimum received. If, in any year, you re- irrevocable upon the death of the owner.ceive more than the required minimum amount for that

3. The beneficiaries of the trust who are beneficiariesyear, you will not receive credit for the additional amountwith respect to the trust’s interest in the owner’swhen determining the minimum required amounts for fu-benefit are identifiable from the trust instrument.ture years. This does not mean that you do not reduce your

IRA account balance. It means that if you receive more 4. The IRA trustee, custodian, or issuer has been pro-than your required minimum distribution in one year, you vided with either a copy of the trust instrument withcannot treat the excess (the amount that is more than the the agreement that if the trust instrument isrequired minimum distribution) as part of your required amended, the administrator will be provided with aminimum distribution for any later year. However, any copy of the amendment within a reasonable time, oramount distributed in your 701/2 year will be credited toward all of the following.the amount that must be distributed by April 1 of the

a. A list of all of the beneficiaries of the trust (includ-following year.ing contingent and remaindermen beneficiarieswith a description of the conditions on their entitle-Example. Justin became 701/2 on December 15, 2003.ment).Justin’s IRA account balance on December 31, 2002, was

$38,400. He figured his required minimum distribution for b. Certification that, to the best of the owner’s knowl-2003 was $1,401 ($38,400 ÷ 27.4). By December 31, edge, the list is correct and complete and that the2003, he had actually received distributions totaling requirements of (1), (2), and (3) above, are met.$3,600, $2,199 more than was required. Justin cannot use

c. An agreement that, if the trust instrument isthat $2,199 to reduce the amount he is required to with-amended at any time in the future, the owner will,draw for 2004, but his IRA account balance is reduced bywithin a reasonable time, provide to the IRA trus-the full $3,600 to figure his required minimum distributiontee, custodian, or issuer corrected certifications tofor 2004. Justin’s reduced IRA account balance on Decem-the extent that the amendment changes any infor-ber 31, 2003, was $34,800. Justin figured his requiredmation previously certified.minimum distribution for 2004 is $1,313 ($34,800 ÷ 26.5).

During 2004, he must receive distributions of at least that d. An agreement to provide a copy of the trust instru-amount. ment to the IRA trustee, custodian, or issuer upon

demand.Multiple individual beneficiaries. If as of September 30of the year following the year in which the owner dies there

The deadline for providing the beneficiary documenta-is more than one beneficiary, the beneficiary with thetion to the IRA trustee, custodian, or issuer is October 31 ofshortest life expectancy will be the designated beneficiarythe year following the year of the owner’s death.if both of the following apply.

If the beneficiary of the trust is another trust and theabove requirements for both trusts are met, the beneficia-1. All of the beneficiaries are individuals, andries of the other trust will be treated as having been desig-

2. The account or benefit has not been divided into nated as beneficiaries for purposes of determining theseparate accounts or shares for each beneficiary. distribution period.

The separate account rules cannot be used by benefi-Separate accounts. Separate accounts with separate ciaries of a trust.

beneficiaries can be set up at any time, either before orafter the owner’s required beginning date. If separate ac- Annuity distributions from an insurance company.counts with separate beneficiaries are set up, the separate Special rules apply if you receive distributions from your




traditional IRA as an annuity purchased from an insurance contributions. These nondeductible contributions are notcompany. See sections 1.401(a)(9)–6T and 54.4974–2 of taxed when they are distributed to you. They are a return ofthe regulations. These regulations can be found in many your investment in your IRA.libraries and IRS offices. Only the part of the distribution that represents nonde-

ductible contributions (your cost basis) is tax free. If nonde-ductible contributions have been made, distributionsconsist partly of nondeductible contributions (basis) andAre Distributions Taxable?partly of deductible contributions, earnings, and gains (ifthere are any). Until all of your basis has been distributed,In general, distributions from a traditional IRA are taxableeach distribution is partly nontaxable and partly taxable.in the year you receive them.

Failed financial institutions. Distributions from a tradi- Form 8606. You must complete Form 8606, and attach ittional IRA are taxable in the year you receive them even if to your return, if you receive a distribution from a traditionalthey are made without your consent by a state agency as IRA and have ever made nondeductible contributions toreceiver of an insolvent savings institution. This means you any of your traditional IRAs. Using the form, you will figuremust include such distributions in your gross income un- the nontaxable distributions for 2003, and your total IRAless you roll them over. For an exception to the 1-year basis for 2003 and earlier years. See the illustrated Formswaiting period rule for rollovers of certain distributions from 8606 in this chapter.failed financial institutions, see Exception under RolloverFrom One IRA Into Another, earlier. Note. If you are required to file Form 8606, but you are

not required to file an income tax return, you still must fileExceptions. Exceptions to distributions from traditionalForm 8606. Complete Form 8606, sign it, and send it to theIRAs being taxable in the year you receive them are:IRS at the time and place you would otherwise file an

• Rollovers, income tax return.

• Tax-free withdrawals of contributions, discussed ear-Figuring the Nontaxablelier, and

and Taxable Amounts• The return of nondeductible contributions, discussedlater under Distributions Fully or Partly Taxable.

If your traditional IRA includes nondeductible contributionsand you received a distribution from it in 2003, you must

Although a conversion of a traditional IRA is con- use Form 8606 to figure how much of your 2003 IRAsidered a rollover for Roth IRA purposes, it is not distribution is tax free.an exception to the rule that distributions from aCAUTION

!traditional IRA are taxable in the year you receive them. Contribution and distribution in the same year. If youConversion distributions are includable in your gross in- received a distribution in 2003 from a traditional IRA andcome subject to this rule and the special rules for conver- you also made contributions to a traditional IRA for 2003sions explained earlier and in chapter 2. that may not be fully deductible because of the income

limits, you can use Worksheet 1–5 to figure how much ofOrdinary income. Distributions from traditional IRAs that your 2003 IRA distribution is tax free and how much isyou include in income are taxed as ordinary income. taxable. Then you can figure the amount of nondeductible

contributions to report on Form 8606. Follow the instruc-No special treatment. In figuring your tax, you cannottions under Reporting your nontaxable distribution onuse the 10-year tax option or capital gain treatment thatForm 8606, next, to figure your remaining basis after theapplies to lump-sum distributions from qualified employerdistribution.plans.

Reporting your nontaxable distribution on Form 8606.Distributions Fully or Partly Taxable To report your nontaxable distribution and to figure the

remaining basis in your traditional IRA after distributions,Distributions from your traditional IRA may be fully or partly you must complete Worksheet 1–5 before completingtaxable, depending on whether your IRA includes any Form 8606. Then follow these steps to complete Formnondeductible contributions. 8606.Fully taxable. If only deductible contributions were made

1. Use the IRA Deduction Worksheet in the Form 1040to your traditional IRA (or IRAs, if you have more than one),or 1040A instructions to figure your deductible contri-you have no basis in your IRA. Because you have nobutions to traditional IRAs to report on line 24 ofbasis in your IRA, any distributions are fully taxable whenForm 1040 or line 17 of Form 1040A.received. See Reporting and Withholding Requirements

for Taxable Amounts, later. 2. After you complete the IRA deduction worksheet inthe form instructions, enter your nondeductible con-

Partly taxable. If you made nondeductible contributions tributions to traditional IRAs on line 1 of Form 8606.to any of your traditional IRAs, you have a cost basis

3. Complete lines 2 through 5 of Form 8606.(investment in the contract) equal to the amount of those




4. If line 5 of Form 8606 is less than line 8 of Worksheet Example. Bill King has made nondeductible contribu-1–5, complete lines 6 through 15 of Form 8606 and tions to a traditional IRA totaling $2,000, giving him a basisstop here. at the end of 2002 of $2,000. By the end of 2003, his IRA

earns $400 in interest income. In that year, Bill receives a5. If line 5 of Form 8606 is equal to or greater than linedistribution of $600 ($500 basis + $100 interest), reducing8 of Worksheet 1–5, follow instructions 6 and 7,the value of his IRA to $1,800 ($2,000 + 400 − 600) atnext. Do not complete lines 6 through 12 of Formyear’s end. Bill figures the taxable part of the distribution8606.and his remaining basis on Form 8606 (illustrated).

6. Enter the amount from line 8 of Worksheet 1–5 on In 2004, Bill’s IRA has a loss of $500. At the end of thatlines 13 and 17 of Form 8606. year, Bill’s IRA balance is $1,300 ($1,800 − 500). Bill’s

remaining basis in his IRA is $1,500 ($2,000 − 500). Bill7. Complete line 14 of Form 8606.receives the $1,300 balance remaining in the IRA. He can

8. Enter the amount from line 9 of Worksheet 1–5 (or, if claim a loss for 2004 of $200 (the $1,500 basis minus theyou entered an amount on line 11, the amount from $1,300 distribution of the IRA balance).that line) on line 15 of Form 8606.

Other Special IRAExample. Rose Green has made the following contribu- Distribution Situations

tions to her traditional IRAs.Two other special IRA distribution situations are discussed

Year Deductible Nondeductible below.

1996 $2,000 –0– Distribution of an annuity contract from your IRA1997 2,000 –0– account. You can tell the trustee or custodian of your1998 2,000 –0– traditional IRA account to use the amount in the account to1999 1,000 –0– buy an annuity contract for you. You are not taxed when2000 1,000 –0– you receive the annuity contract. You are taxed when you2001 1,000 –0– start receiving payments under that annuity contract.2002 700 $ 300

Tax treatment. If only deductible contributions wereTotals $9,700 $ 300made to your traditional IRA since it was set up (this

In 2003, Rose, whose IRA deduction for that year may be includes all your traditional IRAs, if you have more thanreduced or eliminated, makes a $2,000 contribution that one), the annuity payments are fully taxable.may be partly nondeductible. She also receives a distribu- If any of your traditional IRAs include both deductibletion of $5,000 for conversion to a Roth IRA. She completed and nondeductible contributions, the annuity payments arethe conversion before December 31, 2003, and did not taxed as explained earlier under Distributions Fully orrecharacterize any contributions. At the end of 2003, the Partly Taxable.fair market values of her accounts, including earnings, total

Cashing in retirement bonds. When you cash in retire-$20,000. She did not receive any tax-free distributions inment bonds, you are taxed on the entire amount youearlier years. The amount she includes in income for 2003receive. Unless you have already cashed them in, you willis figured on Worksheet 1–5, Figuring the Taxable Part ofbe taxed on the entire value of your bonds in the year inYour IRA Distribution—Illustrated.which you reach age 701/2. The value of the bonds is theThe Form 8606 for Rose, illustrated, shows the informa-amount you would have received if you had cashed themtion required when you need to use Worksheet 1–5 toin at the end of that year. When you later cash in the bonds,figure your nontaxable distribution. Assume that the $500you will not be taxed again.entered on line 1 of Form 8606 is the amount Rose figured

using instructions 1 and 2 given earlier under Reportingyour nontaxable distribution on Form 8606. Reporting and Withholding

Requirements for Taxable AmountsRecognizing Losses on Traditional

If you receive a distribution from your traditional IRA, youIRA Investmentswill receive Form 1099–R, or a similar statement. IRAdistributions are shown in boxes 1 and 2 of Form 1099–R.If you have a loss on your traditional IRA investment, youA number or letter code in box 7 tells you what type ofcan recognize (include) the loss on your income tax return,distribution you received from your IRA.but only when all the amounts in all your traditional IRA

accounts have been distributed to you and the total distri- Number codes. Some of the number codes are explainedbutions are less than your unrecovered basis, if any. Your below. All of the codes are explained in the instructions forbasis is the total amount of the nondeductible contributions recipients on Form 1099–R.in your traditional IRAs. You claim the loss as a miscellane-o u s i t e m i z e d d e d u c t i o n , s u b j e c t t o t h e 1—Early distribution, no known exception.2%-of-adjusted-gross-income limit that applies to certain

2—Early distribution, exception applies.miscellaneous itemized deductions on Schedule A, Form1040. 3—Disability.




Worksheet 1–5. Figuring the Taxable Part of Your IRA Distribution

Use only if you made contributions to a traditional IRA for 2003 and have to figure the taxable partof your 2003 distributions to determine your modified AGI. See Limit If Covered By Employer Plan.Form 8606 and the related instructions will be needed when using this worksheet.

Note. When used in this worksheet, the term outstanding rollover refers to an amount distributedfrom a traditional IRA as part of a rollover that, as of December 31, 2003, had not yet beenreinvested in another traditional IRA, but was still eligible to be rolled over tax free.

1. Enter the basis in your traditional IRA(s) as of December 31, 2002 . . . . . . . . . . . . . . 1.

2. Enter the total of all contributions made to your traditional IRAs during 2003 and allcontributions made during 2004 that were for 2003, whether or not deductible. Donot include rollover contributions properly rolled over into IRAs. Also, do not includecertain returned contributions described in the instructions for line 7, Part I, of Form8606. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.

3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

4. Enter the value of all your traditional IRA(s) as of December 31, 2003 (include anyoutstanding rollovers from traditional IRAs to other traditional IRAs) . . . . . . . . . . . . . 4.

5. Enter the total distributions from traditional IRAs (including amounts converted to RothIRAs that will be shown on line 16 of Form 8606) received in 2003. (Do not includeoutstanding rollovers included on line 4 or any rollovers between traditional IRAscompleted by December 31, 2003. Also, do not include certain returned contributionsdescribed in the instructions for line 7, Part I, of Form 8606.) . . . . . . . . . . . . . . . . . . . 5.

6. Add lines 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Divide line 3 by line 6. Enter the result as a decimal (rounded to at least three places).If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Nontaxable portion of the distribution.Multiply line 5 by line 7. Enter the result here and on lines 13 and 17 of Form 8606 . . 8.

9. Taxable portion of the distribution (before adjustment for conversions).Subtract line 8 from line 5. Enter the result here and if there are no amountsconverted to Roth IRAs, stop here and enter the result on line 15 of Form 8606 . . . . 9.

10. Enter the amount included on line 9 that is allocable to amounts converted to RothIRAs by December 31, 2003. (See Note at the end of this worksheet.) Enter here andon line 18 of Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.

11. Taxable portion of the distribution (after adjustments for conversions).Subtract line 10 from line 9. Enter the result here and on line 15 of Form 8606 . . . . . 11.

Note. If the amount on line 5 of this worksheet includes an amount converted to a Roth IRA by December 31, 2003, you mustdetermine the percentage of the distribution allocable to the conversion. To figure the percentage, divide the amount converted(from line 16 of Form 8606) by the total distributions shown on line 5. To figure the amounts to include on line 10 of this worksheetand on line 18, Part II of Form 8606, multiply line 9 of the worksheet by the percentage you figured.

4—Death. If code 1, 5, or 8 appears on your Form 1099–R,you are probably subject to a penalty or additional5—Prohibited transaction.tax. If code 1 appears, see Early Distributions,CAUTION

!7—Normal distribution. later. If code 5 appears, see Prohibited Transactions, later.

If code 8 appears, see Excess Contributions, later.8—Excess contributions plus earnings/excess deferrals (and/or earnings)taxable in 2003. Letter codes. Some of the letter codes are explained

below. All of the codes are explained in the instructions forrecipients on Form 1099–R.

D—Excess contributions plus earnings/excess deferrals taxable in 2001.




Worksheet 1–5. Figuring the Taxable Part of Your IRA Distribution—Illustrated

Use only if you made contributions to a traditional IRA for 2003 and have to figure the taxable partof your 2003 distributions to determine your modified AGI. See Limit If Covered By Employer Plan.Form 8606 and the related instructions will be needed when using this worksheet.

Note. When used in this worksheet, the term outstanding rollover refers to an amount distributedfrom a traditional IRA as part of a rollover that, as of December 31, 2003, had not yet beenreinvested in another traditional IRA, but was still eligible to be rolled over tax free.

1. Enter the basis in your traditional IRA(s) as of December 31, 2002 . . . . . . . . . . . . . . . . . . 1. 300

2. Enter the total of all contributions made to your traditional IRAs during 2003 and allcontributions made during 2004 that were for 2003, whether or not deductible. Do notinclude rollover contributions properly rolled over into IRAs. Also, do not include certainreturned contributions described in the instructions for line 7, Part I, of Form 8606. . . . . . . 2. 2,000

3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 2,300

4. Enter the value of all your traditional IRA(s) as of December 31, 2003 (include anyoutstanding rollovers from traditional IRAs to other traditional IRAs) . . . . . . . . . . . . . . . . . 4. 20,000

5. Enter the total distributions from traditional IRAs (including amounts converted to RothIRAs that will be shown on line 16 of Form 8606) received in 2003. (Do not includeoutstanding rollovers included on line 4 or any rollovers between traditional IRAscompleted by December 31, 2003. Also, do not include certain returned contributionsdescribed in the instructions for line 7, Part I, of Form 8606.) . . . . . . . . . . . . . . . . . . . . . . . 5. 5,000

6. Add lines 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. 25,000

7. Divide line 3 by line 6. Enter the result as a decimal (rounded to at least three places).If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. .092

8. Nontaxable portion of the distribution.Multiply line 5 by line 7. Enter the result here and on lines 13 and 17 of Form 8606 . . . . . . 8. 460

9. Taxable portion of the distribution (before adjustment for conversions).Subtract line 8 from line 5. Enter the result here and if there are no amounts converted toRoth IRAs, stop here and enter the result on line 15 of Form 8606 . . . . . . . . . . . . . . . . . . 9. 4,540

10. Enter the amount included on line 9 that is allocable to amounts converted to Roth IRAsby December 31, 2003. (See Note at the end of this worksheet.) Enter here and on line 18of Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. 4,540

11. Taxable portion of the distribution (after adjustments for conversions).Subtract line 10 from line 9. Enter the result here and on line 15 of Form 8606 . . . . . . . . . 11. 0

Note. If the amount on line 5 of this worksheet includes an amount converted to a Roth IRA by December 31, 2003, you mustdetermine the percentage of the distribution allocable to the conversion. To figure the percentage, divide the amount converted(from line 16 of Form 8606) by the total distributions shown on line 5. To figure the amounts to include on line 10 of this worksheetand on line 18, Part II of Form 8606, multiply line 9 of the worksheet by the percentage you figured.

G—Direct rollover to a qualified plan, a tax-sheltered Q—Roth IRA qualified distribution.annuity, a governmental 457(b) plan, or an IRA. May R—Recharacterized IRA contribution made for 2002 also include a transfer from a conduit IRA to a and recharacterized in 2003. qualified plan.

S—Early distributions from a SIMPLE IRA in firstJ—Early distribution from a Roth IRA, no known 2 years, no known exception.

exception.T—Roth IRA distribution, exception applies.

N—Recharacterized IRA contribution made for 2003and recharacterized in 2003. If the distribution shown on Form 1099–R is from your IRA,

P—Excess contributions plus earnings/ SEP-IRA, or SIMPLE IRA, the small box in box 7 (labeledexcess deferrals taxable in 2002. IRA/SEP/SIMPLE) should be marked with an “X.”




If code D, J, P, or S appears on your Form1099–R, you are probably subject to a penalty or What Acts Result in Penaltiesadditional tax. If code D appears, see ExcessCAUTION

!Contributions, later. If code J appears, see Early Distribu- or Additional Taxes?tions, later. If code P appears, see Excess Contributions,later. If code S appears, see Additional Tax on Early The tax advantages of using traditional IRAs for retirementDistributions in chapter 3. savings can be offset by additional taxes and penalties if

you do not follow the rules. There are additions to theregular tax for using your IRA funds in prohibited transac-Withholding. Federal income tax is withheld from distri-tions. There are also additional taxes for the followingbutions from traditional IRAs unless you choose not toactivities.have tax withheld.

The amount of tax withheld from an annuity or a similar • Investing in collectibles.periodic payment is based on your marital status and the

• Making excess contributions.number of withholding allowances you claim on your with-holding certificate (Form W–4P). If you have not filed a • Taking early distributions.certificate, tax will be withheld as if you are a married

• Allowing excess amounts to accumulate (failing toindividual claiming three withholding allowances.take required distributions).

Generally, tax will be withheld at a 10% rate on nonperi-odic distributions. There are penalties for overstating the amount of nonde-

ductible contributions and for failure to file Form 8606, ifIRA distributions delivered outside the Unitedrequired.States. In general, if you are a U.S. citizen or resident

alien and your home address is outside the United States This chapter discusses those acts that you should avoidor its possessions, you cannot choose exemption from and the additional taxes and other costs, including loss ofwithholding on distributions from your traditional IRA. IRA status, that apply if you do not avoid those acts.

To choose exemption from withholding, you must certifyto the payer under penalties of perjury that you are not a Prohibited TransactionsU.S. citizen, a resident alien of the United States, or a

Generally, a prohibited transaction is any improper use oftax-avoidance expatriate.your traditional IRA account or annuity by you, your benefi-

Even if this election is made, the payer must withhold ciary, or any disqualified person.tax at the rates prescribed for nonresident aliens.

Disqualified persons include your fiduciary and mem-More information. For more information on withhold- bers of your family (spouse, ancestor, lineal descendant,

ing on pensions and annuities, see Pensions and Annui- and any spouse of a lineal descendant).ties in chapter 1 of Publication 505, Tax Withholding and

The following are examples of prohibited transactionsEstimated Tax. For more information on withholding onwith a traditional IRA.nonresident aliens and foreign entities, see Publication

515, Withholding of Tax on Nonresident Aliens and For-• Borrowing money from it.eign Entities.• Selling property to it.

Reporting taxable distributions on your return. Report • Receiving unreasonable compensation for managingfully taxable distributions, including early distributions, on it.line 15b, Form 1040 (no entry is required on line 15a), or

• Using it as security for a loan.line 11b, Form 1040A. If only part of the distribution istaxable, enter the total amount on line 15a, Form 1040 (or • Buying property for personal use (present or future)line 11a, Form 1040A), and the taxable part on line 15b (or with IRA funds.11b). You cannot report distributions on Form 1040EZ.

Fiduciary. For these purposes, a fiduciary includes any-Estate tax. Generally, the value of an annuity or other one who does any of the following.payment receivable by any beneficiary of a decedent’straditional IRA that represents the part of the purchase • Exercises any discretionary authority or discretionaryprice contributed by the decedent (or by his or her former control in managing your IRA or exercises any au-employer(s)), must be included in the decedent’s gross thority or control in managing or disposing of itsestate. For more information, see the instructions for assets.Schedule I, Form 706, United States Estate (and

• Provides investment advice to your IRA for a fee, orGeneration-Skipping Transfer) Tax Return.has any authority or responsibility to do so.

• Has any discretionary authority or discretionary re-sponsibility in administering your IRA.




Proof as of

November 20, 2

003

(subject to

change)

Rose Green 001 00 0000

500

300

800

0800

460 *

340

0 *

*From Worksheet in Publication 590.

OMB No. 1545-1007

Nondeductible IRAsForm 8606� See separate instructions.

Department of the TreasuryInternal Revenue Service

AttachmentSequence No. 48� Attach to Form 1040, Form 1040A, or Form 1040NR.

Your social security numberName. If married, file a separate form for each spouse required to file Form 8606. See page 5 of the instructions.

Apt. no.Home address (number and street, or P.O. box if mail is not delivered to your home)Fill in Your Address Onlyif You Are Filing ThisForm by Itself and NotWith Your Tax Return

City, town or post office, state, and ZIP code

11 Enter your nondeductible contributions to traditional IRAs for 2003, including those made for

2003 from January 1, 2004, through April 15, 2004 (see page 5 of the instructions)

2 2Enter your total basis in traditional IRAs (see page 6 of the instructions)

3 Add lines 1 and 2

4

3

Enter those contributions included on line 1 that were made from January 1, 2004, through April15, 2004

5

45Subtract line 4 from line 3

6 Enter the value of all your traditional, SEP, and SIMPLE IRAs as ofDecember 31, 2003, plus any outstanding rollovers (see page 6 ofthe instructions)

8

7

Enter the net amount you converted from traditional, SEP, and SIMPLEIRAs to Roth IRAs in 2003. Do not include amounts converted thatyou later recharacterized (see page 7 of the instructions). Also enterthis amount on line 16

9 9

10

Add lines 6, 7, and 810

� .

11

Divide line 5 by line 9. Enter the result as a decimal rounded to atleast 3 places. If the result is 1.000 or more, enter “1.000”

11 Multiply line 8 by line 10. This is the nontaxable portion of the amountyou converted to Roth IRAs. Also enter this amount on line 17

1212

13

Multiply line 7 by line 10. This is the nontaxable portion of yourdistributions that you did not convert to a Roth IRA

13

14

15

Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2003 and earlieryears

Cat. No. 63966F Form 8606 (2003

�

In 2003, did you take adistribution from traditional,SEP, or SIMPLE IRAs ormake a Roth IRA conversion?

No

Yes

Enter the amount from line 3 online 14. Do not complete the restof Part I.Go to line 4.

Taxable amount. Subtract line 12 from line 7. Also include this amount on Form 1040, line 15b;Form 1040A, line 11b; or Form 1040NR, line 16b

�

�

6

For Paperwork Reduction Act Notice, see page 8 of the instructions.

Part I Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAsComplete this part only if:● You made nondeductible contributions to a traditional IRA for 2003,● You took distributions from a traditional, SEP, or SIMPLE IRA in 2003 (other than a rollover, conversion

recharacterization, or return of certain contributions) and you made nondeductible contributions to a traditional IRAin 2003 or an earlier year, or

● You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2003 (excluding any portionyou recharacterized) and you made nondeductible contributions to a traditional IRA in 2003 or an earlier year.

Enter your distributions from traditional, SEP, and SIMPLE IRAs in2003. Do not include rollovers, conversions to a Roth IRA, certainreturned contributions, or recharacterizations of traditional IRAcontributions (see page 6 of the instructions)

7

Add lines 11 and 12. This is the nontaxable portion of all your distributions14

8

15

Note: You may be subject to an additional 10% tax on the amount on line 15 if you were underage 591⁄2 at the time of the distr ibution (see page 7 of the instructions).

2003




Proof as of

November 20, 2

003

(subject to

change)

5,000

4,540 *

460

Page 2Form 8606 (2003)

Under penalties of perjury, I declare that I have examined this form, including accompanying attachments, and to the best of myknowledge and belief, it is true, correct, and complete.Sign Here Only if You

Are Filing This Formby Itself and Not WithYour Tax Return �� DateYour signature

Part III

Complete this part if you converted part or all of your traditional, SEP, and SIMPLE IRAs to a Roth IRA in 2003 (excludingany portion you recharacterized).

17

18

If you completed Part I, enter the amount from line 11. Otherwise, enter your basis in the amounton line 16 (see page 7 of the instructions)

16

19 Enter your total distributions from Roth IRAs in 2003. Do not include rollovers, recharacterizations ofRoth IRA conversions or contributions, or certain returned contributions (see page 7 of the instructions)

20 Enter your basis in Roth IRA contributions (see page 8 of the instructions)

21 Subtract line 20 from line 19. If zero or less, enter -0- and skip lines 22 through 25. If more than zero,you may be subject to an additional tax if you were under age 591⁄2 (see page 8 of the instructions)

22 Enter your basis in Roth IRA conversions (see page 8 of the instructions)

19

Taxable amount. Subtract line 17 from line 16. Also include this amount on Form 1040,line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b

Form 8606 (2003)

Caution: If your modified adjusted gross income is over $100,000 or you are marr ied filing separately and you livedwith your spouse at any time in 2003, you cannot convert any amount from traditional, SEP, or SIMPLE IRAs to RothIRAs for 2003. If you erroneously made a conversion, you must recharacter ize (correct) it (see page 7 of the instructions).

Part II

16 If you completed Part I, enter the amount from line 8. Otherwise, enter the net amount youconverted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2003. Do not include amountsyou later recharacterized back to traditional, SEP, or SIMPLE IRAs in 2003 or 2004 (see page 7of the instructions)

17

18Distributions From Roth IRAsComplete this part only if you took a distribution from a Roth IRA in 2003 (other than a rollover, recharacterization, orreturn of certain contributions—see page 7 of the instructions).

25 Taxable amount. Subtract line 24 from line 21. If zero or less, enter -0-. Also include this amounton Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b

20

21

25

2003 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs

22

24 Add lines 22 and 23

23 Qualified first-time homebuyer distribution (see page 8 of theinstructions). Do not enter more than $10,000

24

23




Proof as of

November 20, 2

003

(subject to

change)

Bill King 002 00 0000

0

2,000

2,000

02,000

500

500

1,500

100

1,800

600

2,400

833

OMB No. 1545-1007

Nondeductible IRAsForm 8606� See separate instructions.


AttachmentSequence No. 48� Attach to Form 1040, Form 1040A, or Form 1040NR.

Your social security numberName. If married, file a separate form for each spouse required to file Form 8606. See page 5 of the instructions.

Apt. no.Home address (number and street, or P.O. box if mail is not delivered to your home)Fill in Your Address Onlyif You Are Filing ThisForm by Itself and NotWith Your Tax Return

City, town or post office, state, and ZIP code

11 Enter your nondeductible contributions to traditional IRAs for 2003, including those made for

2003 from January 1, 2004, through April 15, 2004 (see page 5 of the instructions)

2 2Enter your total basis in traditional IRAs (see page 6 of the instructions)

3 Add lines 1 and 2

4

3

Enter those contributions included on line 1 that were made from January 1, 2004, through April15, 2004

5

45Subtract line 4 from line 3

6 Enter the value of all your traditional, SEP, and SIMPLE IRAs as ofDecember 31, 2003, plus any outstanding rollovers (see page 6 ofthe instructions)

8

7

Enter the net amount you converted from traditional, SEP, and SIMPLEIRAs to Roth IRAs in 2003. Do not include amounts converted thatyou later recharacterized (see page 7 of the instructions). Also enterthis amount on line 16

9 9

10

Add lines 6, 7, and 810

� .

11

Divide line 5 by line 9. Enter the result as a decimal rounded to atleast 3 places. If the result is 1.000 or more, enter “1.000”

11 Multiply line 8 by line 10. This is the nontaxable portion of the amountyou converted to Roth IRAs. Also enter this amount on line 17

1212

13

Multiply line 7 by line 10. This is the nontaxable portion of yourdistributions that you did not convert to a Roth IRA

13

14

15

Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2003 and earlieryears

Cat. No. 63966F Form 8606 (2003)

�

In 2003, did you take adistribution from traditional,SEP, or SIMPLE IRAs ormake a Roth IRA conversion?

No

Yes

Enter the amount from line 3 online 14. Do not complete the restof Part I.Go to line 4.

Taxable amount. Subtract line 12 from line 7. Also include this amount on Form 1040, line 15b;Form 1040A, line 11b; or Form 1040NR, line 16b

�

�

6

For Paperwork Reduction Act Notice, see page 8 of the instructions.

Part I Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAsComplete this part only if:● You made nondeductible contributions to a traditional IRA for 2003,● You took distributions from a traditional, SEP, or SIMPLE IRA in 2003 (other than a rollover, conversion,

recharacterization, or return of certain contributions) and you made nondeductible contributions to a traditional IRAin 2003 or an earlier year, or

● You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2003 (excluding any portionyou recharacterized) and you made nondeductible contributions to a traditional IRA in 2003 or an earlier year.

Enter your distributions from traditional, SEP, and SIMPLE IRAs in2003. Do not include rollovers, conversions to a Roth IRA, certainreturned contributions, or recharacterizations of traditional IRAcontributions (see page 6 of the instructions)

7

Add lines 11 and 12. This is the nontaxable portion of all your distributions14

8

15

Note: You may be subject to an additional 10% tax on the amount on line 15 if you were underage 591⁄2 at the time of the distr ibution (see page 7 of the instructions).

2003




Effect on an IRA account. Generally, if you or your bene- • Your receipt of services at reduced or no cost fromthe bank where your traditional IRA is established orficiary engages in a prohibited transaction in connectionmaintained.with your traditional IRA account at any time during the

year, the account stops being an IRA as of the first day ofthat year. Payments of cash, property, or other consideration.

Even if a sponsor makes payments to you or your family,Effect on you or your beneficiary. If your account stops there is no prohibited transaction if all three of the followingbeing an IRA because you or your beneficiary engaged in requirements are met.a prohibited transaction, the account is treated as distribut-

1. The payments are for establishing a traditional IRAing all its assets to you at their fair market values on the firstor for making additional contributions to it.day of the year. If the total of those values is more than

your basis in the IRA, you will have a taxable gain that is 2. The IRA is established solely to benefit you, yourincludible in your income. For information on figuring your spouse, and your or your spouse’s beneficiaries.gain and reporting it in income, see Are Distributions Tax-

3. During the year, the total fair market value of theable, earlier. The distribution may be subject to additionalpayments you receive is not more than:taxes or penalties.

a. $10 for IRA deposits of less than $5,000, orBorrowing on an annuity contract. If you borrowmoney against your traditional IRA annuity contract, you b. $20 for IRA deposits of $5,000 or more.must include in your gross income the fair market value ofthe annuity contract as of the first day of your tax year. You If the consideration is group term life insurance, require-may have to pay the 10% additional tax on early distribu- ments (1) and (3) do not apply if no more than $5,000 oftions, discussed later. the face value of the insurance is based on a

dollar-for-dollar basis on the assets in your IRA.Pledging an account as security. If you use a part ofyour traditional IRA account as security for a loan, that part Services received at reduced or no cost. Even if ais treated as a distribution and is included in your gross sponsor provides services at reduced or no cost, there isincome. You may have to pay the 10% additional tax on no prohibited transaction if all five of the following require-early distributions, discussed later. ments are met.

Trust account set up by an employer or an employee 1. The traditional IRA qualifying you to receive the serv-ices is established and maintained for the benefit ofassociation. Your account or annuity does not lose itsyou, your spouse, and your or your spouse’s benefi-IRA treatment if your employer or the employee associa-ciaries.tion with whom you have your traditional IRA engages in a

prohibited transaction. 2. The bank itself can legally offer the services.Owner participation. If you participate in the prohibited 3. The services are provided in the ordinary course of

transaction with your employer or the association, your business by the bank (or a bank affiliate) to custom-account is no longer treated as an IRA. ers who qualify but do not maintain an IRA (or a

Keogh plan).Taxes on prohibited transactions. If someone other

4. The determination, for a traditional IRA, of who quali-than the owner or beneficiary of a traditional IRA engagesfies for these services is based on an IRA (or ain a prohibited transaction, that person may be liable forKeogh plan) deposit balance equal to the lowestcertain taxes. In general, there is a 15% tax on the amountqualifying balance for any other type of account.of the prohibited transaction and a 100% additional tax if

the transaction is not corrected. 5. The rate of return on a traditional IRA investment thatqualifies is not less than the return on an identicalLoss of IRA status. If the traditional IRA ceases to beinvestment that could have been made at the samean IRA because of a prohibited transaction by you or yourtime at the same branch of the bank by a customerbeneficiary, you or your beneficiary are not liable for thesewho is not eligible for (or does not receive) these

excise taxes. However, you or your beneficiary may have services.to pay other taxes as discussed under Effect on you or yourbeneficiary, earlier.

Investment in CollectiblesExempt Transactions If your traditional IRA invests in collectibles, the amount

invested is considered distributed to you in the year in-The following two types of transactions are not prohibitedvested. You may have to pay the 10% additional tax ontransactions if they meet the requirements that follow.early distributions, discussed later.

• Payments of cash, property, or other considerationCollectibles. These include:by the sponsor of your traditional IRA to you (or

members of your family). • Art works,




• Rugs, Paul figures his additional tax for 2003 by multiplying theexcess contribution ($500) shown on line 16, Form 5329,• Antiques,by .06, giving him an additional tax liability of $30. He

• Metals, enters the tax on line 17, Form 5329, and on line 57, Form1040. See Paul’s filled-in Form 5329.• Gems,

• Stamps,Excess Contributions Withdrawn

• Coins, by Due Date of Return• Alcoholic beverages, and

You will not have to pay the 6% tax if you withdraw an• Certain other tangible personal property. excess contribution made during a tax year and you also

withdraw any interest or other income earned on the ex-Exception. Your IRA can invest in one, one-half, cess contribution. You must complete your withdrawal by

one-quarter, or one-tenth ounce U.S. gold coins, or the date your tax return for that year is due, includingone-ounce silver coins minted by the Treasury Depart- extensions.ment. It can also invest in certain platinum coins and

How to treat withdrawn contributions. Do not include incertain gold, silver, palladium, and platinum bullion.your gross income an excess contribution that you with-draw from your traditional IRA before your tax return is dueExcess Contributions if both of the following conditions are met.

Generally, an excess contribution is the amount contrib- 1. No deduction was allowed for the excess contribu-uted to your traditional IRAs for the year that is more than tion.the smaller of:

2. You withdraw the interest or other income earned onthe excess contribution.1. $3,000 ($3,500 if 50 or older), or

You can take into account any loss on the contribution2. Your taxable compensation for the year.while it was in the IRA when calculating the amount that

The taxable compensation limit applies whether your con- must be withdrawn. If there was a loss, the net income youtributions are deductible or nondeductible. must withdraw may be a negative amount.

Contributions for the year you reach age 701/2 and any In most cases, the net income you must transfer will bedetermined by your IRA trustee or custodian. If you need tolater year are also excess contributions.determine the applicable net income you need to withdraw,An excess contribution could be the result of your contri-you can use the same method that was used in Worksheetbution, your spouse’s contribution, your employer’s contri-1–3, earlier.bution, or an improper rollover contribution. If your

employer makes contributions on your behalf to aSEP-IRA, see Publication 560. How to treat withdrawn interest or other income. You

must include in your gross income the interest or otherincome that was earned on the excess contribution. ReportTax on Excess Contributionsit on your return for the year in which the excess contribu-tion was made. Your withdrawal of interest or other incomeIn general, if the excess contributions for a year are notmay be subject to an additional 10% tax on early distribu-withdrawn by the date your return for the year is duetions, discussed later.(including extensions), you are subject to a 6% tax. You

must pay the 6% tax each year on excess amounts thatForm 1099–R. You will receive Form 1099–R indicatingremain in your traditional IRA at the end of your tax year.the amount of the withdrawal. If the excess contributionThe tax cannot be more than 6% of the value of your IRAwas made in a previous tax year, the form will indicate theas of the end of your tax year.year in which the earnings are taxable.

The additional tax is figured on Form 5329. For informa-tion on filing Form 5329, see Reporting Additional Taxes, Example. Maria, age 35, made an excess contributionlater. in 2003 of $1,000, which she withdrew by April 15, 2004,

the due date of her return. At the same time, she alsoExample. For 2003, Paul Jones is 45 years old and withdrew the $50 income that was earned on the $1,000.

single, his compensation is $31,000, and he contributed She must include the $50 in her gross income for 2003 (the$3,500 to his traditional IRA. Paul has made an excess year in which the excess contribution was made). Shecontribution to his IRA of $500 ($3,500 minus the $3,000 must also pay an additional tax of $5 (the 10% additionallimit). The contribution earned $5 interest in 2003 and $6 tax on early distributions because she is not yet 591/2 yearsinterest in 2004 before the due date of the return, including old), but she does not have to report the excess contribu-extensions. He does not withdraw the $500 or the interest tion as income or pay the 6% excise tax. Maria receives ait earned by the due date of his return, including exten- Form 1099–R showing that the earnings are taxable forsions. 2003.




Proof as of

November 20, 2

003

(subject to

change)

Complete this part if you contributed more to your traditional IRAs for 2003 than is allowable or you had an amounton line 17 of your 2002 Form 5329.

Caution: If any part of the amount on line 3 was a distribution from a SIMPLE IRA, you may haveto include 25% of that amount on line 4 instead of 10% (see instructions).

Distributions included in income from Coverdell ESAs and QTPsDistributions included on line 5 that are not subject to the additional tax (see instructions)

Complete this part if you included an amount in income, on Form 1040, line 21, from a Coverdell education savingsaccount (ESA) or a qualified tuition program (QTP).

Paul Jones 003 00 0000

500500

30

OMB No. 1545-0203Additional Taxes on Qualified Plans(Including IRAs) and Other Tax-Favored Accounts5329Form


AttachmentSequence No. 29

� Attach to Form 1040.

Name of individual subject to additional tax. If married filing jointly, see instructions. Your social security number

Home address (number and street), or P.O. box if mail is not delivered to your home

City, town or post office, state, and ZIP code If this is an amendedreturn, check here �

Enter your excess contributions from line 16 of your 2002 Form 5329 (see instructions). If zero,go to line 15

131414

If your traditional IRA contributions for 2003 are less than yourmaximum allowable contribution, see instructions. Otherwise, enter -0-

15

2003 traditional IRA distributions included in income (see instructions)

15

2003 distributions of prior year excess contributions (see instructions)Add lines 10, 11, and 12Prior year excess contributions. Subtract line 13 from line 9. If zero or less, enter -0-Excess contributions for 2003 (see instructions)

Additional Tax on Early DistributionsComplete this part if you took a taxable distribution, before you reached age 591⁄2, from a qualified retirement plan(including an IRA) or modified endowment contract (unless you are reporting this tax directly on Form 1040—see above).You also may have to complete this part if you received a Form 1099-R that incorrectly indicates an early distributionor you received a Roth IRA distribution (see instructions).

1 Early distributions included in income. For Roth IRA distributions, see instructions 1

Early distributions included on line 1 that are not subject to the additional tax (see instructions).Enter the appropriate exception number from the instructions:

223Amount subject to additional tax. Subtract line 2 from line 13

4 Additional tax. Enter 10% (.10) of line 3. Include this amount on Form 1040, line 57 4

For Paperwork Reduction Act Notice, see page 4 of the instructions. Form 5329 (2003)Cat. No. 13329Q

Apt. no.

Part I

Part II

If you only owe the additional 10% tax on early distributions, you may be able toreport this tax directly on Form 1040, line 57, without filing Form 5329. See theinstructions for Form 1040, line 57.

Fill in Your Address OnlyIf You Are Filing ThisForm by Itself and NotWith Your Tax Return

�

55678

678

Additional Tax on Certain Distributions From Education Accounts

9

10

11

Amount subject to additional tax. Subtract line 6 from line 5

12

Additional tax. Enter 10% (.10) of line 7. Include this amount on Form 1040, line 57

9

101112

Part III Additional Tax on Excess Contributions to Traditional IRAs

16Total excess contributions. Add lines 14 and 15

Additional tax. Enter 6% (.06) of the smaller of line 16 or the value of your traditional IRAs onDecember 31, 2003 (including 2003 contributions made in 2004). Include this amount on Form1040, line 57 17

1617

� See separate instructions.

13

2003




Excess Contributions Withdrawn1. Your maximum IRA deduction for this year minusAfter Due Date of Return

any amounts contributed to your traditional IRAs forthis year.In general, you must include all distributions (withdrawals)

from your traditional IRA in your gross income. However, if 2. The total excess contributions in your IRAs at thethe following conditions are met, you can withdraw excess beginning of this year.contributions from your IRA and not include the amount

This method lets you avoid making a withdrawal. It doeswithdrawn in your gross income.not, however, let you avoid the 6% tax on any excess

1. Total contributions (other than rollover contributions) contributions remaining at the end of a tax year.for 2003 to your IRA were not more than $3,000

To figure the amount of excess contributions for previ-($3,500 if 50 or older).ous years that you can deduct this year, see Worksheet

2. You did not take a deduction for the excess contribu- 1–6.tion being withdrawn.

The withdrawal can take place at any time, even after the Worksheet 1–6. Excess Contributionsdue date, including extensions, for filing your tax return for

Deductible This Yearthe year.Use this worksheet to figure the amount of excess

Excess contribution deducted in an earlier year. If you contributions from prior years you can deduct this year.deducted an excess contribution in an earlier year forwhich the total contributions were not more than the maxi-

1. Maximum IRA deduction for the currentmum deductible amount for that year ($2,000 for 2001 andyear . . . . . . . . . . . . . . . . . . . . . . . . . . 1.earlier years, $3,000 for 2002 ($3,500 for 2002 if 50 or

older)), you can still remove the excess from your tradi- 2. IRA contributions for the current year 2.tional IRA and not include it in your gross income. To do

3. Subtract line 2 from line 1. If zero (0) orthis, file Form 1040X, Amended U.S. Individual Incomeless, enter zero . . . . . . . . . . . . . . . . . 3.Tax Return, for that year and do not deduct the excess

contribution on the amended return. Generally, you can file 4. Excess contributions in IRA atan amended return within 3 years after you filed your beginning of year . . . . . . . . . . . . . . . . 4.return, or 2 years from the time the tax was paid, whichever

5. Enter the lesser of line 3 or line 4. Thisis later.is the amount of excess contributions

Excess due to incorrect rollover information. If an ex- for previous years that you can deductcess contribution in your traditional IRA is the result of a this year . . . . . . . . . . . . . . . . . . . . . . . 5.rollover and the excess occurred because the informationthe plan was required to give you was incorrect, you canwithdraw the excess contribution. The limits mentioned Example. Teri was entitled to contribute to her tradi-above are increased by the amount of the excess that is tional IRA and deduct $1,000 in 2002 and $1,500 in 2003due to the incorrect information. You will have to amend (the amounts of her taxable compensation for theseyour return for the year in which the excess occurred to years). For 2002, she actually contributed $1,400 but couldcorrect the reporting of the rollover amounts in that year. deduct only $1,000. In 2002, $400 is an excess contribu-Do not include in your gross income the part of the excess

tion subject to the 6% tax. However, she would not have tocontribution caused by the incorrect information.pay the 6% tax if she withdrew the excess (including anyearnings) before the due date of her 2002 return. Since

Deducting an Excess Contribution Teri did not withdraw the excess, she owes excise tax ofin a Later Year $24 for 2002. To avoid the excise tax for 2003, she can

correct the $400 excess amount from 2002 in 2003 if herYou cannot apply an excess contribution to an earlier year actual contributions are only $1,100 for 2003 (the allowa-even if you contributed less than the maximum amount ble deductible contribution of $1,500 minus the $400 ex-allowable for the earlier year. However, you may be able to

cess from 2002 she wants to treat as a deductibleapply it to a later year if the contributions for that later yearcontribution in 2003). Teri can deduct $1,500 in 2003 (theare less than the maximum allowed for that year.$1,100 actually contributed plus the $400 excess contribu-You can deduct excess contributions for previous yearstion from 2002). This is shown on the following worksheet.that are still in your traditional IRA. The amount you can

deduct this year is the lesser of the following two amounts.




Worksheet 1–6. Example—Illustrated Early DistributionsUse this worksheet to figure the amount of excess

You must include early distributions of taxable amountscontributions from prior years you can deduct this year.from your traditional IRA in your gross income. Early distri-butions are also subject to an additional 10% tax, as

1. Maximum IRA deduction for the current discussed later.year . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 1,500

Early distributions defined. Early distributions generally2. IRA contributions for the current year 2. 1,100are amounts distributed from your traditional IRA account

3. Subtract line 2 from line 1. If zero (0) or or annuity before you are age 591/2, or amounts you receiveless, enter zero . . . . . . . . . . . . . . . . . 3. 400 when you cash in retirement bonds before you are age

591/2.4. Excess contributions in IRA atbeginning of year . . . . . . . . . . . . . . . . 4. 400

Age 591/2 Rule5. Enter the lesser of line 3 or line 4. Thisis the amount of excess contributions

Generally, if you are under age 591/2, you must pay a 10%for previous years that you can deductadditional tax on the distribution of any assets (money orthis year . . . . . . . . . . . . . . . . . . . . . . . 5. 400other property) from your traditional IRA. Distributionsbefore you are age 591/2 are called early distributions.

The 10% additional tax applies to the part of the distribu-Closed tax year. A special rule applies if you incorrectlytion that you have to include in gross income. It is indeducted part of the excess contribution in a closed taxaddition to any regular income tax on that amount.year (one for which the period to assess a tax deficiency

A number of exceptions to this rule are discussed belowhas expired). The amount allowable as a traditional IRAunder Exceptions. Also see Contributions Returned Beforededuction for a later correction year (the year you contrib-Due Date of Return, earlier.ute less than the allowable amount) must be reduced by

the amount of the excess contribution deducted in the You may have to pay a 25%, rather than 10%,additional tax if you receive distributions from aclosed year.SIMPLE IRA before you are age 591/2. See Addi-To figure the amount of excess contributions for previ- CAUTION

!tional Tax on Early Distributions under When Can Youous years that you can deduct this year if you incorrectlyWithdraw or Use Assets? in chapter 3.deducted part of the excess contribution in a closed tax

year, see Worksheet 1–7.After age 591/2 and before age 701/2. After you reach age591/2, you can receive distributions without having to pay

Worksheet 1–7. Excess Contributions the 10% additional tax. Even though you can receiveDeductible This Year if Any Were Deducted distributions after you reach age 591/2, distributions are not

required until you reach age 701/2. See When Must Youin a Closed Tax YearWithdraw Assets? (Required Minimum Distributions), ear-Use this worksheet to figure the amount of excesslier.contributions for prior years that you can deduct this year if

you incorrectly deducted excess contributions in a closedtax year. Exceptions

There are several exceptions to the age 591/2 rule. Even if1. Maximum IRA deduction for the currentyou receive a distribution before you are age 591/2, youyear . . . . . . . . . . . . . . . . . . . . . . . . . . 1.may not have to pay the 10% additional tax if you are in one

2. IRA contributions for the current year 2. of the following situations.3. If line 2 is less than line 1, enter any • You have unreimbursed medical expenses that are

excess contributions that were more than 7.5% of your adjusted gross income.deducted in a closed tax year.

• The distributions are not more than the cost of yourOtherwise, enter zero (0) . . . . . . . . . . 3.medical insurance.

4. Subtract line 3 from line 1 . . . . . . . . . . 4.• You are disabled.

5. Subtract line 2 from line 4. If zero (0) or• You are the beneficiary of a deceased IRA owner.less, enter zero . . . . . . . . . . . . . . . . . 5.

• You are receiving distributions in the form of an6. Excess contributions in IRA atannuity.beginning of year . . . . . . . . . . . . . . . . 6.

• The distributions are not more than your qualified7. Enter the lesser of line 5 or line 6. Thishigher education expenses.is the amount of excess contributions

for previous years that you can deduct • You use the distributions to buy, build, or rebuild athis year . . . . . . . . . . . . . . . . . . . . . . . 7.first home.




• The distribution is due to an IRS levy of the qualified beneficiary or to your estate without either having to payplan. the 10% additional tax.

However, if you inherit a traditional IRA from your de-Most of these exceptions are explained below.ceased spouse and elect to treat it as your own (as dis-cussed under What If You Inherit an IRA, earlier), any

Note. Distributions that are timely and properly rolled distribution you later receive before you reach age 591/2over, as discussed earlier, are not subject to either regular may be subject to the 10% additional tax.income tax or the 10% additional tax. Certain withdrawals

Annuity. You can receive distributions from your tradi-of excess contributions after the due date of your return aretional IRA that are part of a series of substantially equalalso tax free and therefore not subject to the 10% addi-payments over your life (or your life expectancy), or overtional tax. (See Excess Contributions Withdrawn After Duethe lives (or the joint life expectancies) of you and yourDate of Return, earlier.) This also applies to transfersbeneficiary, without having to pay the 10% additional tax,incident to divorce, as discussed earlier under Can Youeven if you receive such distributions before you are ageMove Retirement Plan Assets.591/2. You must use an IRS-approved distribution methodand you must take at least one distribution annually for thisUnreimbursed medical expenses. Even if you are underexception to apply. The “required minimum distributionage 591/2, you do not have to pay the 10% additional tax onmethod,” when used for this purpose, results in the exactdistributions that are not more than:amount required to be distributed, not the minimum

1. The amount you paid for unreimbursed medical ex- amount.penses during the year of the distribution, minus There are two other IRS-approved distribution methods

that you can use. They are generally referred to as the2. 7.5% of your adjusted gross income (defined later)“fixed amortization method” and the “fixed annuitizationfor the year of the distribution.method.” These two methods are not discussed in this

You can only take into account unreimbursed medical publication because they are more complex and generallyexpenses that you would be able to include in figuring a require professional assistance. See Revenue Rulingdeduction for medical expenses on Schedule A, Form 2002–62 in Internal Revenue Bulletin 2002–42 for more1040. You do not have to itemize your deductions to take information on these two methods. To obtain a copy of thisadvantage of this exception to the 10% additional tax. revenue ruling, see Mail in chapter 5. This revenue ruling

can also be found in many libraries and IRS offices.Adjusted gross income. This is the amount on FormThe payments under this exception must generally con-1040, line 35, or Form 1040A, line 22.

tinue until at least 5 years after the date of the first pay-Medical insurance. Even if you are under age 591/2, you ment, or until you reach age 591/2, whichever is later. If amay not have to pay the 10% additional tax on distributions change from an approved distribution method is madeduring the year that are not more than the amount you paid before the end of the appropriate period, any paymentsduring the year for medical insurance for yourself, your you receive before you reach age 591/2 will be subject tospouse, and your dependents. You will not have to pay the the 10% additional tax. This is true even if the change istax on these amounts if all four of the following conditions made after you reach age 591/2. The payments will not beapply. subject to the 10% additional tax if another exception

applies or if the change is made because of your death or1. You lost your job. disability.2. You received unemployment compensation paid One-time switch. If you are receiving a series of sub-

under any federal or state law for 12 consecutive stantially equal periodic payments, you can make aweeks because you lost your job. one-time switch to the required minimum distribution

method at any time without incurring the additional tax.3. You receive the distributions during either the yearOnce a change is made, you must follow the requiredyou received the unemployment compensation or theminimum distribution method in all subsequent years.following year.

Higher education expenses. Even if you are under age4. You receive the distributions no later than 60 days591/2, if you paid expenses for higher education during theafter you have been reemployed.year, part (or all) of any distribution may not be subject tothe 10% additional tax. The part not subject to the tax isDisabled. If you become disabled before you reach agegenerally the amount that is not more than the qualified591/2, any distributions from your traditional IRA because ofhigher education expenses (defined later) for the year foryour disability are not subject to the 10% additional tax.education furnished at an eligible educational institutionYou are considered disabled if you can furnish proof(defined later). The education must be for you, yourthat you cannot do any substantial gainful activity becausespouse, or the children or grandchildren of you or yourof your physical or mental condition. A physician mustspouse.determine that your condition can be expected to result in

When determining the amount of the distribution that isdeath or to be of long, continued, and indefinite duration.not subject to the 10% additional tax, include qualified

Beneficiary. If you die before reaching age 591/2, the higher education expenses paid with any of the followingassets in your traditional IRA can be distributed to your funds.




3. When added to all your prior qualified first-time• An individual’s earnings.homebuyer distributions, if any, the total distributions

• A loan. cannot be more than $10,000.

• A gift.If both you and your spouse are first-time

• An inheritance given to either the student or the homebuyers (defined later), each of you can re-ceive distributions up to $10,000 for a first homeindividual making the withdrawal.

TIP

without having to pay the 10% additional tax.• Personal savings (including savings from a qualifiedtuition program). Qualified acquisition costs. Qualified acquisition

costs include the following items.Do not include expenses paid with any of the followingfunds.

1. Costs of buying, building, or rebuilding a home.• Tax-free distributions from a Coverdell education

2. Any usual or reasonable settlement, financing, orsavings account (formerly called education IRAs).other closing costs.

• Tax-free part of scholarships and fellowships.First-time homebuyer. Generally, you are a first-time• Employer-provided educational assistance.

homebuyer if you had no present interest in a main home• Veterans’ educational assistance. during the 2-year period ending on the date of acquisition

of the home which the distribution is being used to buy,• Any other tax-free payment (other than a gift or in-build, or rebuild. If you are married, your spouse must alsoheritance) received as educational assistance.meet this no-ownership requirement.

Qualified higher education expenses. Qualified Date of acquisition. The date of acquisition is the datehigher education expenses are tuition, fees, books, sup- that:plies, and equipment required for the enrollment or attend-

1. You enter into a binding contract to buy the mainance of a student at an eligible educational institution.home for which the distribution is being used, orThey also include expenses for special needs services

incurred by or for special needs students in connection 2. The building or rebuilding of the main home for whichwith their enrollment or attendance. In addition, if the indi- the distribution is being used begins.vidual is at least a half-time student, room and board arequalified higher education expenses.

Note. Distributions that are timely and properly rolledEligible educational institution. This is any college, over, as discussed earlier, are not subject to either regular

university, vocational school, or other postsecondary edu- income tax or the 10% additional tax. Certain withdrawalscational institution eligible to participate in the student aid of excess contributions are also tax free and not subject toprograms administered by the Department of Education. It the 10% additional tax. (See Excess Contributions With-includes virtually all accredited, public, nonprofit, and pro- drawn by Due Date of Return, and Excess Contributionsprietary (privately owned profit-making) postsecondary in- Withdrawn After Due Date of Return, earlier.) This alsostitutions. The educational institution should be able to tell applies to transfers incident to divorce, as discussed underyou if it is an eligible educational institution. Can You Move Retirement Plan Assets, earlier.

Receivership distributions. Early distributions (with orFirst home. Even if you are under age 591/2, you do notwithout your consent) from savings institutions placed inhave to pay the 10% additional tax on distributions youreceivership are subject to this tax unless one of the abovereceive to buy, build, or rebuild a first home. To qualify forexceptions applies. This is true even if the distribution istreatment as a first-time homebuyer distribution, the distri-from a receiver that is a state agency.bution must meet all the following requirements.

1. It must be used to pay qualified acquisition costs Additional 10% tax(defined later) before the close of the 120th day afterthe day you received it. The additional tax on early distributions is 10% of the

amount of the early distribution that you must include in2. It must be used to pay qualified acquisition costs foryour gross income. This tax is in addition to any regularthe main home of a first-time homebuyer (definedincome tax resulting from including the distribution in in-later) who is any of the following.come.

a. Yourself. Use Form 5329 to figure the tax. See the discussion ofForm 5329, later, under Reporting Additional Taxes forb. Your spouse.information on filing the form.

c. Your or your spouse’s child.Example. Tom Jones, who is 35 years old, receives ad. Your or your spouse’s grandchild.

$3,000 distribution from his traditional IRA account. Tome. Your or your spouse’s parent or other ancestor. does not meet any of the exceptions to the 10% additional




tax, so the $3,000 is an early distribution. Tom never made Conditions. To qualify for exemption from the tax, theany nondeductible contributions to his IRA. He must in- assets in your traditional IRA must include an affectedclude the $3,000 in his gross income for the year of the investment. Also, the amount of your required distributiondistribution and pay income tax on it. Tom must also pay an must be determined as discussed earlier under When Mustadditional tax of $300 (10% × $3,000). He files Form 5329. You Withdraw Assets.See the filled-in Form 5329. Affected investment defined. Affected investment

means an annuity contract or a guaranteed investmentEarly distributions of funds from a SIMPLE retire-contract (with an insurance company) for which paymentsment account made within 2 years of beginningunder the terms of the contract have been reduced orparticipation in the SIMPLE are subject to a 25%,CAUTION

!suspended because of state insurer delinquency proceed-rather than 10%, early distributions tax.ings against the contracting insurance company.

Nondeductible contributions. The tax on early distribu- Requirements. If your traditional IRA (or IRAs) in-tions does not apply to the part of a distribution that cludes assets other than your affected investment, allrepresents a return of your nondeductible contributions traditional IRA assets, including the available portion of(basis). your affected investment, must be used to satisfy as much

as possible of your IRA distribution requirement. If theaffected investment is the only asset in your IRA, as muchExcess Accumulationsas possible of the required distribution must come from the(Insufficient Distributions)available portion, if any, of your affected investment.

You cannot keep amounts in your traditional IRA indefi- Available portion. The available portion of your af-nitely. Generally, you must begin receiving distributions by fected investment is the amount of payments remainingApril 1 of the year following the year in which you reach age after they have been reduced or suspended because of701/2. The required minimum distribution for any year after state insurer delinquency proceedings.the year in which you reach age 701/2 must be made by

Make up of shortfall in distribution. If the payments toDecember 31 of that later year.you under the contract increase because all or part of the

Tax on excess. If distributions are less than the re- reduction or suspension is canceled, you must make upquired minimum distribution for the year, discussed earlier the amount of any shortfall in a prior distribution because ofunder When Must You Withdraw Assets? (Required Mini- the proceedings. You make up (reduce or eliminate) themum Distributions), you may have to pay a 50% excise tax shortfall with the increased payments you receive.for that year on the amount not distributed as required. You must make up the shortfall by December 31 of the

calendar year following the year that you receive increasedReporting the tax. Use Form 5329 to report the tax on payments.excess accumulations. See the discussion of Form 5329,later, under Reporting Additional Taxes, for more informa-

Reporting Additional Taxestion on filing the form.

Generally, you must use Form 5329 to report the tax onRequest to excuse the tax. If the excess accumulation isexcess contributions, early distributions, and excess accu-due to reasonable error, and you have taken, or are taking,mulations. If you must file Form 5329, you cannot usesteps to remedy the insufficient distribution, you can re-Form 1040A or Form 1040EZ.quest that the tax be excused.

If you believe you qualify for this relief, do the following. Filing a tax return. If you must file an individual incometax return, complete Form 5329 and attach it to your Form1. File Form 5329 with your Form 1040.1040. Enter the total additional taxes due on line 57, Form

2. Pay any tax you owe on excess accumulations. 1040.

3. Attach a letter of explanation. Not filing a tax return. If you do not have to file a return,but do have to pay one of the additional taxes mentionedIf the IRS approves your request, it will refund theearlier, file the completed Form 5329 with the IRS at theexcess accumulations tax you paid.time and place you would have filed Form 1040. Be sure to

Exemption from tax. If you are unable to take required include your address on page 1 and your signature anddistributions because you have a traditional IRA invested date on page 2. Enclose, but do not attach, a check orin a contract issued by an insurance company that is in money order payable to the United States Treasury for thestate insurer delinquency proceedings, the 50% excise tax tax you owe, as shown on Form 5329. Write your socialdoes not apply if the conditions and requirements of Reve- security number and “2003 Form 5329” on your check ornue Procedure 92–10 are satisfied. Those conditions and money order.requirements are summarized below. Revenue Procedure Form 5329 not required. You do not have to use Form92–10 is in Cumulative Bulletin 1992–1. To obtain a copy

5329 if either of the following situations exist.of this revenue procedure, see Mail in chapter 5. You canalso read the revenue procedure at most IRS offices and at • Distribution code 1 (early distribution) is correctlymany public libraries. shown in box 7 of Form 1099–R. If you do not owe




Proof as of

November 20, 2

003

(subject to

change)Additional Tax on Certain Distributions From Education Accounts

Tom Jones 004 00 0000

3003,000

0

3,000

OMB No. 1545-0203Additional Taxes on Qualified Plans(Including IRAs) and Other Tax-Favored Accounts5329Form


AttachmentSequence No. 29

� Attach to Form 1040.

Name of individual subject to additional tax. If married filing jointly, see instructions. Your social security number

Home address (number and street), or P.O. box if mail is not delivered to your home

City, town or post office, state, and ZIP code If this is an amendedreturn, check here �

Enter your excess contributions from line 16 of your 2002 Form 5329 (see instructions). If zero,go to line 15

131414

If your traditional IRA contributions for 2003 are less than yourmaximum allowable contribution, see instructions. Otherwise, enter -0-

15

2003 traditional IRA distributions included in income (see instructions)

15

2003 distributions of prior year excess contributions (see instructions)Add lines 10, 11, and 12Prior year excess contributions. Subtract line 13 from line 9. If zero or less, enter -0-Excess contributions for 2003 (see instructions)

Additional Tax on Early DistributionsComplete this part if you took a taxable distribution, before you reached age 591⁄2, from a qualified retirement plan(including an IRA) or modified endowment contract (unless you are reporting this tax directly on Form 1040—see above).You also may have to complete this part if you received a Form 1099-R that incorrectly indicates an early distributionor you received a Roth IRA distribution (see instructions).

1 Early distributions included in income. For Roth IRA distributions, see instructions 1

Early distributions included on line 1 that are not subject to the additional tax (see instructions).Enter the appropriate exception number from the instructions:

223Amount subject to additional tax. Subtract line 2 from line 13

4 Additional tax. Enter 10% (.10) of line 3. Include this amount on Form 1040, line 57 4

For Paperwork Reduction Act Notice, see page 4 of the instructions. Form 5329 (2003)Cat. No. 13329Q

Apt. no.

Part I

Part II

If you only owe the additional 10% tax on early distributions, you may be able toreport this tax directly on Form 1040, line 57, without filing Form 5329. See theinstructions for Form 1040, line 57.

Fill in Your Address OnlyIf You Are Filing ThisForm by Itself and NotWith Your Tax Return

�

Caution: If any part of the amount on line 3 was a distribution from a SIMPLE IRA, you may haveto include 25% of that amount on line 4 instead of 10% (see instructions).

55678

678

Distributions included in income from Coverdell ESAs and QTPs

9

10

Distributions included on line 5 that are not subject to the additional tax (see instructions)

11

Amount subject to additional tax. Subtract line 6 from line 5

12

Additional tax. Enter 10% (.10) of line 7. Include this amount on Form 1040, line 57

9

101112

Part III Additional Tax on Excess Contributions to Traditional IRAsComplete this part if you contributed more to your traditional IRAs for 2003 than is allowable or you had an amounton line 17 of your 2002 Form 5329.

16Total excess contributions. Add lines 14 and 15

Additional tax. Enter 6% (.06) of the smaller of line 16 or the value of your traditional IRAs onDecember 31, 2003 (including 2003 contributions made in 2004). Include this amount on Form1040, line 57 17

1617

Complete this part if you included an amount in income, on Form 1040, line 21, from a Coverdell education savingsaccount (ESA) or a qualified tuition program (QTP).

� See separate instructions.

13

2003




any other additional tax on a distribution, multiply thetaxable part of the early distribution by 10% and What is a Roth IRA?enter the result on line 57 of Form 1040. Put “No” to

A Roth IRA is an individual retirement plan that, except asthe left of line 57 to indicate that you do not have toexplained in this chapter, is subject to the rules that applyfile Form 5329. However, if you owe this tax andto a traditional IRA (defined below). It can be either analso owe any other additional tax on a distribution,account or an annuity. Individual retirement accounts anddo not enter this 10% additional tax directly on yourannuities are described in chapter 1 under How Can aForm 1040. You must file Form 5329 to report yourTraditional IRA Be Set Up.additional taxes.

To be a Roth IRA, the account or annuity must be• If you rolled over part or all of a distribution from a designated as a Roth IRA when it is set up. A deemed IRA

qualified retirement plan, the part rolled over is not can be a Roth IRA, but neither a SEP-IRA nor a SIMPLEIRA can be designated as a Roth IRA.subject to the tax on early distributions.

Unlike a traditional IRA, you cannot deduct contributionsto a Roth IRA. But, if you satisfy the requirements, qualifieddistributions (discussed later) are tax free. Contributionscan be made to your Roth IRA after you reach age 701/2and you can leave amounts in your Roth IRA as long asyou live.2.Traditional IRA. A traditional IRA is any IRA that is not aRoth IRA or SIMPLE IRA. Traditional IRAs are discussedin chapter 1.Roth IRAs

When Can a Roth IRA Be SetImportant Change for 2003Up?

Deemed IRAs. For plan years beginning after 2002, aqualified employer plan (retirement plan) can maintain a You can set up a Roth IRA at any time. However, the timeseparate account or annuity under the plan (a deemed for making contributions for any year is limited. See WhenIRA) to receive voluntary employee contributions. If the Can You Make Contributions, later under Can You Contrib-

ute to a Roth IRA.separate account or annuity otherwise meets the require-ments of an IRA, it will be subject only to IRA rules. Anemployee’s account can be treated as a traditional IRA or aRoth IRA. Can You Contribute to

For this purpose, a “qualified employer plan” includes: a Roth IRA?• A qualified pension, profit-sharing, or stock bonus

Generally, you can contribute to a Roth IRA if you haveplan (section 401(a) plan),taxable compensation (defined later) and your modified

• A qualified employee annuity plan (section 403(a) AGI (defined later) is less than:plan), • $160,000 for married filing jointly or qualifying

widow(er),• A tax-sheltered annuity plan (section 403(b) plan),and • $10,000 for married filing separately and you lived

with your spouse at any time during the year, and• A deferred compensation plan (section 457 plan)maintained by a state, a political subdivision of a • $110,000 for single, head of household, or marriedstate, or an agency or instrumentality of a state or filing separately and you did not live with yourpolitical subdivision of a state. spouse at any time during the year.

You may be eligible to claim a credit for contribu-tions to your Roth IRA. For more information, seeIntroductionchapter 4.

TIP

Regardless of your age, you may be able to establish andmake nondeductible contributions to an individual retire- Is there an age limit for contributions? Contributions

can be made to your Roth IRA regardless of your age.ment plan called a Roth IRA.

Can you contribute to a Roth IRA for your spouse?Contributions not reported. You do not report Roth IRA You can contribute to a Roth IRA for your spouse providedcontributions on your return. the contributions satisfy the spousal IRA limit (discussed in

Page 54 Chapter 2 Roth IRAs



chapter 1 under How Much Can Be Contributed?), you file e. Foreign housing exclusion or deduction,jointly, and your modified AGI is less than $160,000. f. Exclusion of qualified bond interest shown on

Form 8815, andCompensation. Compensation includes wages, salaries,tips, professional fees, bonuses, and other amounts re- g. Exclusion of employer-provided adoption benefitsceived for providing personal services. It also includes shown on Form 8839.commissions, self-employment income, and taxable ali-mony and separate maintenance payments. For more in- You can use Worksheet 2–1 to figure your modifiedformation, see What Is Compensation? under Who Can AGI.Set Up a Traditional IRA? in chapter 1.

Do not subtract conversion income when figuringModified AGI. Your modified AGI for Roth IRA purposes your other AGI-based phaseouts and taxable in-is your adjusted gross income (AGI) as shown on your come, such as your deduction for medical andCAUTION

!return modified as follows. dental expenses. Subtract it from AGI only for the purpose

of figuring your modified AGI for Roth IRA purposes.1. Subtract conversion income. This is any income re-sulting from the conversion of an IRA (other than aRoth IRA) to a Roth IRA. Conversions are discussed How Much Can Be Contributed?under Can You Move Amounts Into a Roth IRA, later.

The contribution limit for Roth IRAs depends on whether2. Add the following deductions and exclusions:contributions are made only to Roth IRAs or to both tradi-tional IRAs and Roth IRAs.a. Traditional IRA deduction,

b. Student loan interest deduction, Roth IRAs only. If contributions are made only to RothIRAs, your contribution limit generally is the lesser of:c. Tuition and fees deduction,

• $3,000 ($3,500 if you are 50 or older), ord. Foreign earned income exclusion,

Table 2–1. Effect of Modified AGI on Roth IRA ContributionThis table shows whether your contribution to a Roth IRA is affected by the amount of yourmodified adjusted gross income (modified AGI).

IF you have taxable compensationand your filing status is ... AND your modified AGI is ... THEN ...

you can contribute up to $3,000($3,500 if age 50 or older) asless than $150,000 explained under How Much Can BeContributed.

married filing jointly orthe amount you can contribute isqualifying widow(er) at least $150,000 reduced as explained underbut less than $160,000 Contribution limit reduced.

$160,000 or more you cannot contribute to a Roth IRA.

you can contribute up to $3,000zero (-0-) ($3,500 if 50 or older) as explained

under How Much Can Be Contributed.married filing separately and

the amount you can contribute isyou lived with your spouse at any more than zero (-0-) reduced as explained undertime during the year but less than $10,000 Contribution limit reduced.


you can contribute up to $3,000($3,500 if age 50 or older) asless than $95,000 explained under How Much Can Besingle,Contributed.head of household,

or married filing separately and the amount you can contribute isat least $95,000you did not live with your spouse reduced as explained underbut less than $110,000at any time during the year Contribution limit reduced.


Chapter 2 Roth IRAs Page 55



• Your taxable compensation. This means that your contribution limit is the lesser of:

However, if your modified AGI is above a certain amount, • $3,000 ($3,500 if you are 50 or older) minus allyour contribution limit may be reduced, as explained later contributions (other than employer contributionsunder Contribution limit reduced. under a SEP or SIMPLE IRA plan) for the year to all

IRAs other than Roth IRAs, orRoth IRAs and traditional IRAs. If contributions are • Your taxable compensation minus all contributionsmade to both Roth IRAs and traditional IRAs established

(other than employer contributions under a SEP orfor your benefit, your contribution limit for Roth IRAs gener-SIMPLE IRA plan) for the year to all IRAs other thanally is the same as your limit would be if contributions wereRoth IRAs.made only to Roth IRAs, but then reduced by all contribu-

tions (other than employer contributions under a SEP or However, if your modified AGI is above a certain amount,SIMPLE IRA plan) for the year to all IRAs other than Roth your contribution limit may be reduced, as explained nextIRAs. under Contribution limit reduced.

Worksheet 2–1. Modified Adjusted Gross Income for Roth IRA PurposesUse this worksheet to figure your modified adjusted gross income for Roth IRA purposes.

1. Enter your adjusted gross income (Form 1040, line 35 or Form 1040A, line 22) 1.

2. Enter any income resulting from the conversion of an IRA (other than a RothIRA) to a Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.

3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

4. Enter any traditional IRA deduction (Form 1040, line 24 or Form 1040A, line 17) 4.

5. Enter any student loan interest deduction (Form 1040, line 25 or Form 1040A,line 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.

6. Enter any tuition and fees deduction (Form 1040, line 26 or Form 1040A, line19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Enter any foreign earned income and/or housing exclusion (Form 2555, line 43or Form 2555–EZ, line 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Enter any foreign housing deduction (Form 2555, line 48) . . . . . . . . . . . . . . . . . 8.

9. Enter any exclusion of bond interest (Form 8815, line 14) . . . . . . . . . . . . . . . . . 9.

10. Enter any exclusion of employer-provided adoption benefits (Form 8839, line30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.

11. Add the amounts on lines 3 through 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Enter:• $160,000 if married filing jointly or qualifying widow(er)• $10,000 if married filing separately and you lived with your spouse at any

time during the year• $110,000 for all others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.

Next. Is the amount on line 11 more than the amount on line 12?Yes. See the Note below.No. The amount on line 11 is your modified adjusted gross income for RothIRA purposes.

Note. If the amount on line 11 is more than the amount on line 12 and you haveother income or loss items, such as social security income or passive activitylosses, that are subject to AGI-based phaseouts, you can refigure your AGIsolely for the purpose of figuring your modified AGI for Roth IRA purposes.Refigure your AGI without taking into account any income from conversions. (Ifyou receive social security benefits, use Worksheet 1 in Appendix B to refigureyour AGI.) Then go to list item 2) above under Modified AGI or line 4 above inWorksheet 2–1 to refigure your modified AGI. If you do not have other incomeor loss items subject to AGI-based phaseouts, your modified adjusted grossincome for Roth IRA purposes is the amount on line 11 above.




Simplified employee pensions (SEPs) are discussed in Worksheet 2–2. Determining Your ReducedPublication 560. Savings incentive match plans for em- Roth IRA Contribution Limitployees (SIMPLEs) are discussed in chapter 3.

Before using this worksheet, check Table 2–1 to deter-Contribution limit reduced. If your modified AGI is mine whether or not your Roth IRA contribution limit isabove a certain amount, your contribution limit is gradually reduced. If it is, use this worksheet to determine how muchreduced. Use Table 2–1 to determine if this reduction it is reduced.applies to you.

Figuring the reduction. If the amount you can contrib- 1. Enter your modified AGI for Rothute must be reduced, figure your reduced contribution limit IRA purposes . . . . . . . . . . . . . . . . . 1.as follows.

2. Enter:1. Start with your modified AGI. • $150,000 if filing a joint return or

qualifying widow(er)2. Subtract from the amount in (1): • $0 if married filing a separatereturn and you lived with youra. $150,000 if filing a joint return or qualifyingspouse at any time in 2003widow(er),

• $95,000 for all others . . . . . . . . 2.b. $–0– if married filing a separate return, and you

3. Subtract line 2 from line 1 . . . . . . . . 3.lived with your spouse at any time during the year,or 4. Enter:

c. $95,000 for all other individuals. • $10,000 if filing a joint return orqualifying widow(er) or married

3. Divide the result in (2) by $15,000 ($10,000 if filing a filing a separate return and youlived with your spouse at anyjoint return, qualifying widow(er), or married filing atime during the yearseparate return and you lived with your spouse at

• $15,000 for all others . . . . . . . . 4.any time during the year).

4. Multiply the maximum contribution limit (before re- 5. Divide line 3 by line 4 and enter theresult as a decimal (rounded to atduction by this adjustment and before reduction forleast three places). If the result isany contributions to traditional IRAs) by the result in1.000 or more, enter 1.000 . . . . . . . 5.(3).

6. Enter the lesser of:5. Subtract the result in (4) from the maximum contri-bution limit before this reduction. The result is your • $3,000 ($3,500 if 50 or older),reduced contribution limit. or

• Your taxable compensation . . . 6.You can use Worksheet 2–2 to figure the reduction.

7. Multiply line 5 by line 6 . . . . . . . . . . 7.

8. Subtract line 7 from line 6. Roundthe result up to the nearest $10. Ifthe result is less than $200, enter$200 . . . . . . . . . . . . . . . . . . . . . . . . 8.

9. Enter contributions for the year toother IRAs . . . . . . . . . . . . . . . . . . . 9.

10. Subtract line 9 from line 6 . . . . . . . . 10.

11. Enter the lesser of line 8 or line 10.This is your reduced Roth IRAcontribution limit . . . . . . . . . . . . . 11.

Round your reduced contribution limit up to thenearest $10. If your reduced contribution limit ismore than $0, but less than $200, increase the

TIP

limit to $200.

Example. You are a 45-year-old, single individual withtaxable compensation of $113,000. You want to make themaximum allowable contribution to your Roth IRA for 2003.Your modified AGI for 2003 is $100,000. You have notcontributed to any traditional IRA, so the maximum contri-




bution limit before the modified AGI reduction is $3,000. You can make contributions for 2003 by the dueUsing the steps described above, you figure your reduced date (not including extensions) for filing yourRoth IRA contribution of $2,010 as shown on the following 2003 tax return. This means that most people can

TIP

worksheet. make contributions for 2003 by April 15, 2004.

Worksheet 2–2. Example—Illustrated What If You Contribute Too Much?Before using this worksheet, check Table 2–1 to deter-

mine whether or not your Roth IRA contribution limit is A 6% excise tax applies to any excess contribution to areduced. If it is, use this worksheet to determine how much Roth IRA.it is reduced.

Excess contributions. These are the contributions toyour Roth IRAs for a year that equal the total of:

1. Enter your modified AGI for Roth1. Amounts contributed for the tax year to your RothIRA purposes . . . . . . . . . . . . . . . 1. 100,000

IRAs (other than amounts properly and timely rolled2. Enter: over from a Roth IRA or properly converted from a

• $150,000 if filing a joint return traditional IRA, as described later) that are more thanor qualifying widow(er) your contribution limit for the year (explained earlier

• $0 if married filing a separate under How Much Can be Contributed?), plusreturn and you lived with your

2. Any excess contributions for the preceding year, re-spouse at any time in 2003duced by the total of:• $95,000 for all others . . . . . . 2. 95,000

a. Any distributions out of your Roth IRAs for the3. Subtract line 2 from line 1 . . . . . . 3. 5,000year, plus

4. Enter:b. Your contribution limit for the year minus your• $10,000 if filing a joint return

contributions to all your IRAs for the year.or qualifying widow(er) ormarried filing a separatereturn and you lived with your Withdrawal of excess contributions. For purposes ofspouse at any time during the determining excess contributions, any contribution that isyear withdrawn on or before the due date (including extensions)• $15,000 for all others . . . . . . 4. 15,000 for filing your tax return for the year is treated as an amount

not contributed. This treatment only applies if any earnings5. Divide line 3 by line 4 and enteron the contributions are also withdrawn. The earnings arethe result as a decimal (roundedconsidered earned and received in the year the excessto at least three places). If thecontribution was made.result is 1.000 or more, enter 1.00 5. .333

Applying excess contributions. If contributions to your6. Enter the lesser of:Roth IRA for a year were more than the limit, you can apply• $3,000 ($3,500 if 50 or older),the excess contribution in one year to a later year if theorcontributions for that later year are less than the maximum• Your taxable compensation 6. 3,000allowed for that year.

7. Multiply line 5 by line 6 . . . . . . . . 7. 999

8. Subtract line 7 from line 6. Roundthe result up to the nearest $10. If Can You Move Amountsthe result is less than $200, enter$200 . . . . . . . . . . . . . . . . . . . . . . 8. 2,010 Into a Roth IRA?

9. Enter contributions for the year to You may be able to convert amounts from either a tradi-other IRAs . . . . . . . . . . . . . . . . . . 9. 0 tional, SEP, or SIMPLE IRA into a Roth IRA. You may be

able to recharacterize contributions made to one IRA as10. Subtract line 9 from line 6 . . . . . . 10. 3,000having been made directly to a different IRA. You can roll

11. Enter the lesser of line 8 or line amounts over from one Roth IRA to another Roth IRA.10. This is your reduced RothIRA contribution limit . . . . . . . . 11. 2,010

Conversions

You can convert a traditional IRA to a Roth IRA. Theconversion is treated as a rollover, regardless of the con-When Can You Make Contributions?version method used. Most of the rules for rollovers, de-

You can make contributions to a Roth IRA for a year at any scribed in chapter 1 under Rollover From One IRA Intotime during the year or by the due date of your return for Another, apply to these rollovers. However, the 1-yearthat year (not including extensions). waiting period does not apply.




Conversion methods. You can convert amounts from a ment plans other than Roth IRAs are disregarded for pur-poses of the 1-year waiting period between rollovers.traditional IRA to a Roth IRA in any of the following three

A rollover from a Roth IRA to an employer retirementways.plan is not allowed.

1. Rollover. You can receive a distribution from a tradi-tional IRA and roll it over (contribute it) to a Roth IRAwithin 60 days after the distribution. Are Distributions Taxable?

2. Trustee-to-trustee transfer. You can direct the trus-You do not include in your gross income qualified distri-tee of the traditional IRA to transfer an amount frombutions or distributions that are a return of your regularthe traditional IRA to the trustee of the Roth IRA.contributions from your Roth IRA(s). You also do not in-

3. Same trustee transfer. If the trustee of the tradi- clude distributions from your Roth IRA that you roll over taxtional IRA also maintains the Roth IRA, you can free into another Roth IRA. You may have to include part ofdirect the trustee to transfer an amount from the other distributions in your income. See Ordering Rules fortraditional IRA to the Roth IRA. Distributions, later.

Basis of distributed property. The basis of propertySame trustee. Conversions made with the same trus-distributed from a Roth IRA is its fair market value (FMV)tee can be made by redesignating the traditional IRA as aon the date of distribution, whether or not the distribution isRoth IRA, rather than opening a new account or issuing aa qualified distribution.new contract.

Withdrawals of contributions by due date. If you with-More information. For more information on conversions, draw contributions (including any net earnings on the con-see Converting From Any Traditional IRA Into a Roth IRA tributions) by the due date of your return for the year inin chapter 1. which you made the contribution, the contributions are

treated as if you never made them. If you have an exten-sion of time to file your return, you can withdraw theFailed Conversionscontributions and earnings by the extended due date. The

If, when you converted amounts from a traditional IRA or withdrawal of contributions is tax free, but you must includeSIMPLE IRA into a Roth IRA, you expected to have modi- the earnings on the contributions in income for the year infied AGI of less than $100,000 and a filing status other than which you made the contributions.married filing separately, but your expectations did notcome true, you have made a failed conversion. What Are Qualified Distributions?Results of failed conversions. If the converted amount A qualified distribution is any payment or distribution from(contribution) is not recharacterized (explained in chapter your Roth IRA that meets the following requirements.1), the contribution will be treated as a regular contribution

1. It is made after the 5-year period beginning with theto the Roth IRA and subject to the following tax conse-first taxable year for which a contribution was madequences.to a Roth IRA set up for your benefit, and

1. A 6% excise tax per year will apply to any excess 2. The payment or distribution is:contribution not withdrawn from the Roth IRA.

a. Made on or after the date you reach age 591/2,2. The distributions from the traditional IRA must beincluded in your gross income. b. Made because you are disabled,

3. The 10% additional tax on early distributions may c. Made to a beneficiary or to your estate after yourapply to any distribution. death, or

d. One that meets the requirements listed underHow to avoid. You must move the amount convertedFirst home under Exceptions in chapter 1 (up to a(including all earnings from the date of conversion) into a$10,000 lifetime limit).traditional IRA by the due date (including extensions) for

your tax return for the year during which you made theconversion to the Roth IRA. You do not have to include this

Additional Tax on Early Distributionsdistribution (withdrawal) in income.

If you receive a distribution that is not a qualified distribu-Rollover From a Roth IRA tion, you may have to pay the 10% additional tax on earlydistributions as explained in the following paragraphs.You can withdraw, tax free, all or part of the assets from

one Roth IRA if you contribute them within 60 days to Distributions of conversion contributions withinanother Roth IRA. Most of the rules for rollovers, described 5-year period. If, within the 5-year period starting with thein chapter 1 under Rollover From One IRA Into Another, first day of your tax year in which you convert an amountapply to these rollovers. However, rollovers from retire- from a traditional IRA to a Roth IRA, you take a distribution




Figure 2-1. Is the Distribution From Your Roth IRA a Qualified Distribution?

Start Here

NoHas it been at least 5 years from the beginning of theyear in which you first set up and contributed to a RothIRA?

Were you at least 591⁄2 years old at the time of thedistribution?

Is the distribution being used to buy or rebuild a firsthome as explained in First Home under EarlyDistr ibutions in chapter 1?

Is the distribution due to your being disabled?

�

�

�

No

Was the distribution made to your beneficiary or yourestate after your death?

The distribution from the Roth IRA is a qualifieddistribution. It is not subject to tax or penalty.

The distribution from the Roth IRA isnot a qualified distribution. It may besubject to tax and it may be subjectto penalty.

�

Yes

Yes

�

�

No

No

Yes

Yes

Yes

No

�

from a Roth IRA, you may have to pay the 10% additional Other early distributions. Unless one of the exceptionslisted below applies, you must pay the 10% additional taxtax on early distributions. You generally must pay the 10%on the taxable part of any distributions that are not qualifiedadditional tax on any amount attributable to the part of thedistributions.amount converted (the conversion contribution) that you

had to include in income. A separate 5-year period applies Exceptions. You may not have to pay the 10% additionalto each conversion. See Ordering Rules for Distributions, tax in the following situations.later, to determine the amount, if any, of the distribution

• You have reached age 591/2.that is attributable to the part of the conversion contributionthat you had to include in income. • You are disabled.

Unless one of the exceptions listed later applies, you• You are the beneficiary of a deceased IRA owner.must pay the additional tax on the portion of the distribution

attributable to the part of the conversion contribution that • You use the distribution to pay certain qualifiedyou had to include in income because of the conversion. first-time homebuyer amounts.

You must pay the 10% additional tax in the year of the • The distributions are part of a series of substantiallydistribution, even if you had included the conversion contri-equal payments.bution in an earlier year. You also must pay the additional

tax on any portion of the distribution attributable to earn- • You have significant unreimbursed medical ex-ings on contributions. penses.




• You are paying medical insurance premiums after Disregard rollover contributions from other Roth IRAs forlosing your job. this purpose.

• The distributions are not more than your qualified Aggregation (grouping and adding) rules. Deter-higher education expenses. mine the taxable amounts distributed (withdrawn), distribu-

tions, and contributions by grouping and adding them• The distribution is due to an IRS levy of the qualifiedtogether as follows.plan.1. Add all distributions from all your Roth IRAs duringMost of these exceptions are discussed earlier in chapter 1

the year together.under Early Distributions.2. Add all regular contributions made for the year (in-

cluding contributions made after the close of theOrdering Rules for Distributions year, but before the due date of your return) to-gether. Add this total to the total undistributed regularIf you receive a distribution from your Roth IRA that is not acontributions made in prior years.qualified distribution, part of it may be taxable. There is a

set order in which contributions (including conversion con- 3. Add all conversion contributions made during thetributions) and earnings are considered to be distributed year together. For purposes of the ordering rules, infrom your Roth IRA. For these purposes, disregard the the case of any conversion in which the conversionwithdrawal of excess contributions and the earnings on distribution is made in 2003 and the conversion con-them (discussed earlier under What If You Contribute Too tribution is made in 2004, treat the conversion contri-Much). Order the distributions as follows. bution as contributed before any other conversion

contributions made in 2004.1. Regular contributions.

Add any recharacterized contributions that end up in a2. Conversion contributions, on a first-in-first-out basis Roth IRA to the appropriate contribution group for the year

(generally, total conversions from the earliest year that the original contribution would have been taken intofirst). See Aggregation (grouping and adding) rules, account if it had been made directly to the Roth IRA.later. Take these conversion contributions into ac- Disregard any recharacterized contribution that ends upcount as follows: in an IRA other than a Roth IRA for the purpose of grouping

(aggregating) both contributions and distributions. Alsoa. Taxable portion (the amount required to be in-disregard any amount withdrawn to correct an excesscluded in gross income because of conversion)contribution (including the earnings withdrawn) for thisfirst, and then thepurpose.

b. Nontaxable portion.

3. Earnings on contributions.




Example. On October 15, 1998, Justin converted allHow Do You Figure the Taxable Part?$80,000 in his traditional IRA to his Roth IRA. His Forms8606 from prior years show that $20,000 of the amountTo figure the taxable part of a distribution that is not aconverted is his basis.qualified distribution, complete Worksheet 2–3.

Justin included $60,000 ($80,000 − $20,000) in hisgross income.Worksheet 2–3. Figuring the Taxable Part of

On February 23, 2003, Justin makes a regular contribu-a Distribution (Other Than a Qualifiedtion of $3,000 to a Roth IRA. On November 7, 2003, JustinDistribution) From a Roth IRA takes a $5,000 distribution from his Roth IRA.

The first $3,000 of the distribution is a return of Justin’s1. Enter the total of all distributions regular contribution and is not includible in his income.

made from your Roth IRA(s) The next $2,000 of the distribution is not includible induring the year . . . . . . . . . . . . . . 1. income because it was included previously.

Because the $2,000 is distributed after the end of the2. Enter the amount of qualified5-year period, it is not subject to the 10% additional tax ondistributions made during the year 2.early distributions.

3. Subtract line 2 from line 1 . . . . . . 3. Justin does not have to file Form 5329 with his return toreport an early distribution or figure additional tax or claim4. Enter the amount of distributionsan exception.made during the year to correct

excess contributions made duringthe year. (Do not includeearnings.) . . . . . . . . . . . . . . . . . . 4. Must You Withdraw or Use

5. Subtract line 4 from line 3 . . . . . . 5. Assets?6. Enter the amount of distributions

You are not required to take distributions from your Rothmade during the year that werecontributed to another Roth IRA in IRA at any age. The minimum distribution rules that applya qualified rollover contribution . . 6. to traditional IRAs do not apply to Roth IRAs while the

owner is alive. However, after the death of a Roth IRA7. Subtract line 6 from line 5 . . . . . . 7.owner, certain of the minimum distribution rules that apply

8. Enter the amount of all prior to traditional IRAs also apply to Roth IRAs as explaineddistributions from your Roth IRA(s) later under Distributions After Owner’s Death.(whether or not they were qualified

Minimum distributions. You cannot use your Rothdistributions) . . . . . . . . . . . . . . . . 8.IRA to satisfy minimum distribution requirements for your

9. Add lines 1 and 8 . . . . . . . . . . . . 9. traditional IRA. Nor can you use distributions from tradi-tional IRAs for required distributions from Roth IRAs. See10. Enter the amount of theDistributions to beneficiaries, later.distributions included on line 8 that

were previously includible in yourincome . . . . . . . . . . . . . . . . . . . . 10. Recognizing Losses on Investments

11. Subtract line 10 from line 9 . . . . . 11. If you have a loss on your Roth IRA investment, you canrecognize the loss on your income tax return, but only12. Enter the total of all yourwhen all the amounts in all of your Roth IRA accounts havecontributions to all of your Rothbeen distributed to you and the total distributions are lessIRAs . . . . . . . . . . . . . . . . . . . . . . 12.than your unrecovered basis. Your basis is the total

13. Enter the total of all distributions amount of contributions in your Roth IRAs. You claim themade (this year and in prior years) loss as a miscellaneous itemized deduction, subject to theto correct excess contributions.

2%-of-adjusted-gross-income limit that applies to certain(Include earnings.) . . . . . . . . . . . 13.miscellaneous itemized deductions on Schedule A, Form

14. Subtract line 13 from line 12. (If 1040.the result is less than 0, enter 0.) 14.

Distributions After Owner’s Death15. Subtract line 14 from line 11. (Ifthe result is less than 0, enter 0.) 15.

If a Roth IRA owner dies, the minimum distribution rules16. Enter the smaller of the amount on that apply to traditional IRAs apply to Roth IRAs as though

line 7 or the amount on line 15. the Roth IRA owner died before his or her required begin-This is the taxable part of your ning date. See When Can You Withdraw or Use Assets? indistribution . . . . . . . . . . . . . . . . 16. chapter 1.

Distributions to beneficiaries. Generally, the entire in-terest in the Roth IRA must be distributed by the end of the




fifth calendar year after the year of the owner’s death distributions does not apply because the distribution wasunless the interest is payable to a designated beneficiary made to the beneficiaries as a result of the death of the IRAover the life or life expectancy of the designated benefi- owner.ciary. (See When Must You Withdraw Assets? (RequiredMinimum Distributions) in chapter 1.) Tax on excess accumulations (insufficient

If paid as an annuity, the entire interest must be payable distributions). If distributions from an inherited Roth IRAover a period not greater than the designated beneficiary’s are less than the required minimum distribution for thelife expectancy and distributions must begin before the end year, discussed in chapter 1 under When Must You With-of the calendar year following the year of death. Distribu- draw Assets? (Required Minimum Distributions), you maytions from another Roth IRA cannot be substituted for have to pay a 50% excise tax for that year on the amountthese distributions unless the other Roth IRA was inherited not distributed as required. For the tax on excess accumu-from the same decedent. lations (insufficient distributions), see Excess Accumula-

If the sole beneficiary is the spouse, he or she can either tions (Insufficient Distributions) under What Acts Result indelay distributions until the decedent would have reached Penalties or Additional Taxes? in chapter 1. If this appliesage 701/2, or treat the Roth IRA as his or her own. to you, substitute “Roth IRA” for “traditional IRA” in that

discussion.Combining with other Roth IRAs. A beneficiary cancombine an inherited Roth IRA with another Roth IRAmaintained by the beneficiary only if the beneficiary either:

• Inherited the other Roth IRA from the same dece-dent, or 3.• Was the spouse of the decedent and the sole benefi-ciary of the Roth IRA and elects to treat it as his orher own IRA. Savings Incentive

Distributions that are not qualified distributions. If a Match Plans fordistribution to a beneficiary is not a qualified distribution, itis generally includible in the beneficiary’s gross income in Employees (SIMPLE)the same manner as it would have been included in theowner’s income had it been distributed to the IRA ownerwhen he or she was alive. Important Changes for 2003

If the owner of a Roth IRA dies before the end of:

• The 5-year period beginning with the first taxable Increase in limit on salary reduction contributionsyear for which a contribution was made to a Roth under a SIMPLE. For 2003, salary reduction contributionsIRA set up for the owner’s benefit, or that your employer can make on your behalf under a

SIMPLE plan are increased to $8,000 (up from $7,000 in• The 5-year period starting with the year of a conver-2002).sion contribution from a traditional IRA to a Roth

For more information about salary reduction contribu-IRA,tions, see How Much Can Be Contributed on Your Behalf?

each type of contribution is divided among multiple benefi- in this chapter.ciaries according to the pro-rata share of each. See Order-

Additional salary reduction contributions to SIMPLEing Rules for Distributions, earlier in this chapter under AreDistributions Taxable. IRAs for persons 50 and older. For 2003, additional

salary reduction contributions can be made to yourExample. When Ms. Hibbard died in 2003, her Roth SIMPLE IRA if:

IRA contained regular contributions of $4,000, a conver-• You were 50 or older in 2003, andsion contribution of $10,000 that was made in 1999, and

earnings of $2,000. No distributions had been made from • No other salary reduction contributions can be madeher IRA. She had no basis in the conversion contribution in for you to the plan for the year because of limits or1999. restrictions, such as the regular annual limit.

When she established her Roth IRA, she named each ofher 4 children as equal beneficiaries. Each child will re- For 2003, the additional amount is the lesser of theceive one-fourth of each type of contribution and following two amounts.one-fourth of the earnings. An immediate distribution of$4,000 to each child will be treated as $1,000 from regular 1. $1,000 (up from $500 for 2002), orcontributions, $2,500 from conversion contributions, and

2. Your compensation for the year reduced by your$500 from earnings.other elective deferrals for the year.

In this case, because the distributions are made beforeFor more information, see How Much Can Be Contrib-the end of the 5-year period, each beneficiary includes

uted on Your Behalf? in this chapter.$500 in income for 2003. The 10% additional tax on early

Chapter 3 Savings Incentive Match Plans for Employees (SIMPLE) Page 63



• Reduce your compensation (salary) by a certain per-Important Changes for 2004 centage each pay period, and

• Have your employer contribute the salary reductionsIncrease in limit on salary reduction contributionsto a SIMPLE IRA on your behalf. These contribu-under a SIMPLE. For 2004, salary reduction contributionstions are called salary reduction contributions.that your employer can make on your behalf under a

SIMPLE plan are increased to $9,000 (up from $8,000 inAll contributions under a SIMPLE IRA plan must be2003). For more information, see How Much Can Be Con-

made to SIMPLE IRAs, not to any other type of IRA. Thetributed on Your Behalf? in this chapter.SIMPLE IRA can be an individual retirement account or anindividual retirement annuity, described in chapter 1. Con-Additional salary reduction contributions to SIMPLEtributions are made on behalf of eligible employees. (SeeIRAs for persons 50 and older. Additional salary reduc-Eligible Employees, later.) Contributions are also subjecttion contributions of $1,500 for 2004 can be made to yourto various limits. (See How Much Can Be Contributed onSIMPLE IRA if:Your Behalf, later.)• You will be age 50 by the end of 2004, and In addition to salary reduction contributions, youremployer must make either matching contributions or• No other salary reduction contributions can be madenonelective contributions. See How Are Contributionsfor you to the plan for the year because of limits orMade, later.restrictions, such as the regular annual limit.

You may be able to claim a credit for contributionsSee How Much Can Be Contributed on Your Behalf? in to your SIMPLE. For more information, see chap-

this chapter. ter 4.TIP

Eligible EmployeesIntroductionThis chapter is for employees who need information about You must be allowed to participate in your employer’ssavings incentive match plans for employees (SIMPLE SIMPLE plan if you:plans). It explains what a SIMPLE plan is, contributions to

• Received at least $5,000 in compensation froma SIMPLE plan, and distributions from a SIMPLE plan.your employer during any 2 years prior to the currentUnder a SIMPLE plan, SIMPLE retirement accounts foryear, andparticipating employees can be set up either as:

• Are reasonably expected to receive at least $5,000• Part of a 401(k) plan, orin compensation during the calendar year for which

• A plan using IRAs (SIMPLE IRA). contributions are made.

This chapter only discusses the SIMPLE plan rules thatrelate to SIMPLE IRAs. See Publication 560 for information Self-employed individual. For SIMPLE plan purposes,on any special rules for SIMPLE plans that do not use the term employee includes a self-employed individualIRAs. who received earned income.

If your employer maintains a SIMPLE plan, you Excludable employees. Your employer can exclude themust be notified, in writing, that you can choose following employees from participating in the SIMPLEthe financial institution that will serve as trustee plan.

TIP

for your SIMPLE IRA and that you can roll over or transfer • Employees whose retirement benefits are coveredyour SIMPLE IRA to another financial institution. See Roll-by a collective bargaining agreement (union con-overs and Transfers Exception, later under When Can Youtract).Withdraw or Use Assets.

• Employees who are nonresident aliens and receivedno earned income from sources within the UnitedStates.What Is a SIMPLE Plan?

• Employees who would not have been eligible em-A SIMPLE plan is a tax-favored retirement plan that certain ployees if an acquisition, disposition, or similar trans-small employers (including self-employed individuals) can action had not occurred during the year.set up for the benefit of their employees. See Publication560 for information on the requirements employers must Compensation. For purposes of the SIMPLE plan rules,satisfy to set up a SIMPLE plan. your compensation for a year generally includes the follow-

A SIMPLE plan is a written agreement (salary reduction ing amounts.agreement) between you and your employer that allowsyou, if you are an eligible employee (including a self-em- • Wages, tips, and other pay from your employer thatployed individual), to choose to: is subject to income tax withholding.

Page 64 Chapter 3 Savings Incentive Match Plans for Employees (SIMPLE)



• Deferred amounts elected under any 401(k) plans, other requirements that your employer must satisfy, see403(b) plans, government (section 457) plans, SEP Publication 560.plans, and SIMPLE plans.

How Much Can Be ContributedSelf-employed individual compensation. For purposesof the SIMPLE plan rules, if you are self-employed, your on Your Behalf?compensation for a year is your net earnings from self-em-ployment (line 4, Section A, or line 6, Section B, of Sched-

The limits on contributions to a SIMPLE IRA vary with theule SE (Form 1040)) before subtracting any contributionstype of contribution that is made.made to a SIMPLE IRA on your behalf.

For these purposes, net earnings from self-employment Salary reduction contributions limit. Salary reductioninclude services performed while claiming exemption from contributions (employee-chosen contributions or electiveself-employment tax as a member of a group conscien- deferrals) that your employer can make on your behalftiously opposed to social security benefits. under a SIMPLE plan are limited to $8,000 for 2003 ($9000

for 2004).

If you are a participant in any other employerHow Are Contributions Made? plans during 2003 and you have elective salaryreductions or deferred compensation under thoseCAUTION

!Contributions under a salary reduction agreement are plans, the salary reduction contributions under thecalled salary reduction contributions. They are made on SIMPLE plan also are included in the annual limit ofyour behalf by your employer. Your employer must also $12,000 for 2003 ($13,000 for 2004) on exclusions ofmake either matching contributions or nonelective contri- salary reductions and other elective deferrals.butions. You, not your employer, are responsible for monitoring

compliance with these limits.Salary reduction contributions. During the 60-day pe-

Additional elective deferrals can be contributed to yourriod before the beginning of any year, and during theSIMPLE if:60-day period before you are eligible, you can choose

salary reduction contributions expressed either as a per- • You reached age 50 by the end of 2003, andcentage of compensation, or as a specific dollar amount (if • No other elective deferrals can be made for you toyour employer offers this choice). You can choose to

the plan for the year because of limits or restrictions,cancel the election at any time during the year.such as the regular annual limit.Salary reduction contributions are also referred to as

“elective deferrals.”The most that can be contributed in additional electiveYour employer cannot place restrictions on the contribu-

deferrals to your SIMPLE is the lesser of the following twotions amount (such as by limiting the contributions percent-amounts.age), except to comply with the salary reduction

contributions limit, discussed under How Much Can Be 1. $1,000 for 2003 ($1,500 for 2004), orContributed on Your Behalf, later.

2. Your compensation for the year reduced by yourother elective deferrals for the year.Matching contributions. Unless your employer chooses

to make nonelective contributions, your employer must The additional deferrals are not subject to any othermake contributions equal to the salary reduction contribu- contribution limit and are not taken into account in applyingtions you choose (elect), but only up to certain limits. See other contribution limits. The additional deferrals are notHow Much Can Be Contributed on Your Behalf, later. subject to the nondiscrimination rules as long as all eligibleThese contributions are in addition to the salary reduction participants are allowed to make them.contributions and must be made to the SIMPLE IRAs of all

Matching employer contributions limit. Generally, youreligible employees (defined earlier) who chose salary re-employer must make matching contributions to yourductions. These contributions are referred to as matchingSIMPLE IRA in an amount equal to your salary reductioncontributions.contributions. These matching contributions cannot beMatching contributions on behalf of a self-employedmore than 3% of your compensation for the calendar year.individual are not treated as salary reduction contributions.See Matching contributions less than 3%, later.

Nonelective contributions. Instead of making matchingcontributions, your employer may be able to choose to Example 1. In 2003, Joshua was a participant in hismake nonelective contributions on behalf of all eligible employer’s SIMPLE plan. His compensation, beforeemployees. These nonelective contributions must be SIMPLE plan contributions, was $41,600, ($800 permade on behalf of each eligible employee who has at least week). Instead of taking it all in cash, Joshua elected to$5,000 of compensation from your employer, whether or have 12.5% of his weekly pay ($100) contributed to hisnot the employee chose salary reductions. SIMPLE IRA. For the full year, Joshua’s salary reduction

One of the requirements your employer must satisfy is contributions were $5,200, which is less than the $8,000notifying the employees that the election was made. For limit on these contributions.

Chapter 3 Savings Incentive Match Plans for Employees (SIMPLE) Page 65



Under the plan, Joshua’s employer was required to Example 3. Assume the same facts as in Example 2,make matching contributions to Joshua’s SIMPLE IRA. except that Joshua’s employer chose to make nonelectiveBecause his employer’s matching contributions must contributions instead of matching contributions. Becauseequal Joshua’s salary reductions, but cannot be more than his employer’s nonelective contributions are limited to 2%3% of his compensation (before salary reductions) for the of up to $200,000 of Joshua’s compensation, hisyear, his employer’s matching contribution was limited to employer’s contribution to Joshua’s SIMPLE IRA was lim-$1,248 (3% of $41,600). ited to $4,000. In this example, total contributions made on

Joshua’s behalf for the year were $12,000 (Joshua’s salaryExample 2. Assume the same facts as in Example 1, reductions of $8,000 plus his employer’s contribution of

except that Joshua’s compensation for the year was $4,000).$268,000 and he chose to have 2.985% of his weekly pay Traditional IRA mistakenly moved to SIMPLE IRA. Ifcontributed to his SIMPLE IRA.

you mistakenly roll over or transfer an amount from aIn this example, Joshua’s salary reduction contributions traditional IRA to a SIMPLE IRA, you can later recharacter-

for the year (2.985% × $268,000) were equal to the 2003 ize the amount as a contribution to another traditional IRA.limit for salary reduction contributions ($8,000). Because For more information, see Recharacterizations in chapter3% of Joshua’s compensation ($8,040) is more than the 1.amount his employer was required to match ($8,000), hisemployer’s matching contributions were limited to $8,000. Recharacterizing employer contributions. You cannot

recharacterize employer contributions (including electiveIn this example, total contributions made on Joshua’sdeferrals) under a SEP or SIMPLE plan as contributions tobehalf for the year were $16,000, the maximum contribu-another IRA. SEPs are discussed in Publication 560.tions permitted under a SIMPLE IRA for 2003.SIMPLE plans are discussed in this chapter.

Matching contributions less than 3%. Your employercan reduce the 3% limit on matching contributions for a Converting from a SIMPLE IRA. Generally, you can con-calendar year, but only if: vert an amount in your SIMPLE IRA to a Roth IRA under

the same rules explained in chapter 1 under Converting1. The limit is not reduced below 1%, From Any Traditional IRA Into a Roth IRA.

However, you cannot convert any amount distributed2. The limit is not reduced for more than 2 years out offrom the SIMPLE IRA during the 2-year period beginningthe 5-year period that ends with (and includes) theon the date you first participated in any SIMPLE IRA planyear for which the election is effective, andmaintained by your employer.

3. Employees are notified of the reduced limit within areasonable period of time before the 60-day electionperiod during which they can enter into salary reduc- When Can You Withdrawtion agreements.

For purposes of applying the rule in item (2) in determin- or Use Assets?ing whether the limit was reduced below 3% for the year,

Generally, the same distribution (withdrawal) rules thatany year before the first year in which your employer (or aapply to traditional IRAs apply to SIMPLE IRAs. Theseformer employer) maintains a SIMPLE IRA plan will berules are discussed in chapter 1.treated as a year for which the limit was 3%. If your

Your employer cannot restrict you from taking distribu-employer chooses to make nonelective contributions for ations from a SIMPLE IRA.year, that year also will be treated as a year for which the

limit was 3%.

Are Distributions Taxable?Nonelective employer contributions limit. If your em-ployer chooses to make nonelective contributions, instead Generally, distributions from a SIMPLE IRA are fully tax-of matching contributions, to each eligible employee’s able as ordinary income. If the distribution is an earlySIMPLE IRA, contributions must be 2% of your compensa- distribution (discussed in chapter 1), it may be subject totion for the entire year. For 2003, only $200,000 of your the additional tax on early distributions. See Additional Taxcompensation can be taken into account to figure the on Early Distributions, later.contribution limit.

Your employer can substitute the 2% nonelective contri-Rollovers and Transfers Exceptionbution for the matching contribution for a year, if both of the

following requirements are met.Generally, rollovers and trustee-to-trustee transfers arenot taxable distributions.1. Eligible employees are notified that a 2% nonelective

contribution will be made instead of a matching con- Two-year rule. To qualify as a tax-free rollover (or atribution. tax-free trustee-to-trustee transfer), a rollover distribution

2. This notice is provided within a reasonable period (or a transfer) made from a SIMPLE IRA during the 2-yearduring which employees can enter into salary reduc- period beginning on the date on which you first participatedtion agreements. in your employer’s SIMPLE plan must be contributed (or

Page 66 Chapter 3 Savings Incentive Match Plans for Employees (SIMPLE)



transferred) to another SIMPLE IRA. The 2-year period Full-time student. You are a full-time student if, duringbegins on the first day on which contributions made by some part of each of 5 calendar months (not necessarilyyour employer are deposited in your SIMPLE IRA. consecutive) during the calendar year, you are either:

After the 2-year period, amounts in a SIMPLE IRA can• A full-time student at a school that has a regularbe rolled over or transferred tax free to an IRA other than a

teaching staff, course of study, and regularly en-SIMPLE IRA, or to a qualified plan, a tax-sheltered annuityrolled body of students in attendance, orplan (section 403(b) plan), or deferred compensation plan

of a state or local government (section 457 plan). • A student taking a full-time, on-farm training coursegiven by either a school that has a regular teachingstaff, course of study, and regularly enrolled body ofAdditional Tax on Early Distributionsstudents in attendance, or a state, county, or local

The additional tax on early distributions (discussed in government.chapter 1) applies to SIMPLE IRAs. If a distribution is an

You are a full-time student if you are enrolled for theearly distribution and occurs during the 2-year period fol-number of hours or courses the school considers to be fulllowing the date on which you first participated in yourtime.employer’s SIMPLE plan, the additional tax on early distri-

butions is increased from 10% to 25%. Adjusted gross income. This is generally the amountIf a rollover distribution (or transfer) from a SIMPLE IRA on line 35 of your 2003 Form 1040 or line 22 of your 2003

does not satisfy the 2-year rule, and is otherwise an early Form 1040A. However, you must add to that amount anydistribution, the additional tax imposed because of the exclusion or deduction claimed for the year for:early distribution is increased from 10% to 25% of theamount distributed. • Foreign earned income,

• Foreign housing costs,

• Income for bona fide residents of American Samoa,and

4. • Income from Puerto Rico.

Eligible contributions. These include:Retirement Savings1. Contributions to a traditional or Roth IRA,Contributions Credit2. Salary reduction contributions (elective deferrals) to:

You may be able to take a tax credit if you make eligiblecontributions (defined later) to a qualified retirement plan, a. A 401(k) plan (including a SIMPLE 401(k)),an eligible deferred compensation plan, or an individual

b. A section 403(b) annuity,retirement arrangement (IRA). You may be able to take acredit of up to $1,000 (up to $2,000 if filing jointly). This c. An eligible deferred compensation plan of a statecredit could reduce the federal income tax you pay dollar or local government (a governmental 457 plan),for dollar.

d. A SIMPLE IRA plan, orCan you claim the credit? If you make eligible contribu- e. A salary reduction SEP, andtions to a qualified retirement plan, an eligible deferredcompensation plan, or an IRA, you can claim the credit if all 3. Contributions to a section 501(c)(18) plan.of the following apply.

They also include voluntary after-tax employee contribu-1. You were born before January 2, 1986. tions to a tax-qualified retirement plan or section 403(b)

annuity. For purposes of the credit, an employee contri-2. You are not a full-time student (explained later).bution will be voluntary as long as it is not required as a

3. No one else, such as your parent(s), claims an ex- condition of employment.emption for you on their tax return.

4. Your adjusted gross income (defined later) is not Reducing eligible contributions. Reduce your eligiblemore than: contributions (but not below zero) by the total distributions

you received during the testing period (defined later) froma. $50,000 if your filing status is married filing jointly,

any IRA, plan, or annuity included above under Eligibleb. $37,500 if your filing status is head of household contributions. Also reduce your eligible contributions by

(with qualifying person), or any distribution from a Roth IRA that is not rolled over,even if the distribution is not taxable.c. $25,000 if your filing status is single, married filing

Do not reduce your eligible contributions by any of theseparately, or qualifying widow(er) with dependentfollowing.child.

Chapter 4 Retirement Savings Contributions Credit Page 67



amount of tax that you would otherwise pay (not counting1. The portion of any distribution which is not includible any refundable credits or the adoption credit) in any year. If

in income because it is a trustee-to-trustee transfer your tax liability is reduced to zero because of otheror a rollover distribution. nonrefundable credits, such as the Hope credit, then you

will not be entitled to this credit.2. Any distribution that is a return of a contribution to anIRA (including a Roth IRA) made during the year for

How to figure and report the credit. The amount of thewhich you claim the credit if:credit you can get is based on the contributions you makeand your credit rate. Your credit rate can be as low as 10%a. The distribution is made before the due date (in-or as high as 50%. Your credit rate depends on yourcluding extensions) of your tax return for thatincome and your filing status. See Form 8880 to determineyear,your credit rate.

b. You do not take a deduction for the contribution, The maximum contribution taken into account is $2,000and per person. On a joint return, up to $2,000 is taken into

account for each spouse.c. The distribution includes any income attributableFigure the credit on Form 8880. Report the credit on lineto the contribution.

48 of your Form 1040 or line 32 of your Form 1040A andattach Form 8880 to your return.3. Loans from a qualified employer plan treated as a

distribution.

4. Distributions of excess contributions or deferrals (andincome attributable to excess contributions and de-ferrals). 5.

5. Distributions of dividends paid on stock held by anemployee stock ownership plan under section404(k).

How To Get Tax HelpDistributions received by spouse. Any distributions

your spouse receives are treated as received by you if you You can get help with unresolved tax issues, order freefile a joint return with your spouse both for the year of the publications and forms, ask tax questions, and get moredistribution and for the year for which you claim the credit. information from the IRS in several ways. By selecting the

method that is best for you, you will have quick and easyTesting period. The testing period consists of the yearaccess to tax help.for which you claim the credit, the period after the end of

that year and before the due date (including extensions) for Contacting your Taxpayer Advocate. If you have at-filing your return for that year, and the 2 tax years before tempted to deal with an IRS problem unsuccessfully, youthat year. should contact your Taxpayer Advocate.

The Taxpayer Advocate independently represents yourExample. You and your spouse filed joint returns in interests and concerns within the IRS by protecting your2001 and 2002, and plan to do so in 2003 and 2004. You rights and resolving problems that have not been fixedreceived a taxable distribution from a qualified plan in 2001 through normal channels. While Taxpayer Advocates can-and a taxable distribution from an eligible deferred com- not change the tax law or make a technical tax decision,pensation plan in 2002. Your spouse received taxable they can clear up problems that resulted from previousdistributions from a Roth IRA in 2003 and tax-free distribu- contacts and ensure that your case is given a completetions from a Roth IRA in 2004 before April 15. You made and impartial review.eligible contributions to an IRA in 2003 and you otherwise To contact your Taxpayer Advocate:qualify for this credit. You must reduce the amount of your

• Call the Taxpayer Advocate toll free atqualifying contributions in 2003 by the total of the distribu-1–877–777–4778.tions you received in 2001, 2002, 2003, and 2004.

• Call, write, or fax the Taxpayer Advocate office inMaximum eligible contributions. After your contribu-your area.tions are reduced, the maximum annual contribution on

which you can base the credit is $2,000 per person. • Call 1–800–829–4059 if you are aTTY/TDD user.Effect on other credits. The amount of this credit will not

• Visit the web site at www.irs.gov/advocate.change the amount of your refundable tax credits. A re-fundable tax credit, such as the earned income credit or

For more information, see Publication 1546, The Tax-the refundable amount of your child tax credit, is anpayer Advocate Service of the IRS.amount that you would receive as a refund even if you did

not otherwise owe any taxes.Free tax services. To find out what services are avail-

Maximum credit. This is a nonrefundable credit. The able, get Publication 910, Guide to Free Tax Services. Itamount of the credit in any year cannot be more than the contains a list of free tax publications and an index of tax

Page 68 Chapter 5



topics. It also describes other free tax information services, payer Assistance Centers. An employee can explainIRS letters, request adjustments to your account, orincluding tax education and assistance programs and a listhelp you set up a payment plan. Call your localof TeleTax topics.Taxpayer Assistance Center for an appointment. ToInternet. You can access the IRS web site 24 find the number, go to www.irs.gov or look in the

hours a day, 7 days a week at www.irs.gov to: phone book under “United States Government, Inter-nal Revenue Service.”

• E-file. Access commercial tax preparation and e-file • TTY/TDD equipment. If you have access to TTY/services available for free to eligible taxpayers. TDD equipment, call 1–800–829– 4059 to ask tax

or account questions or to order forms and publica-• Check the amount of advance child tax credit pay-tions.ments you received in 2003.

• TeleTax topics. Call 1–800–829–4477 to listen to• Check the status of your 2003 refund. Click onpre-recorded messages covering various tax topics.“Where’s My Refund” and then on “Go Get My Re-

fund Status.” Be sure to wait at least 6 weeks from • Refund information. If you would like to check thethe date you filed your return (3 weeks if you filed status of your 2003 refund, call 1–800–829 4477 forelectronically) and have your 2003 tax return avail- automated refund information and follow the re-able because you will need to know your filing status corded instructions or call 1–800–829–1954. Beand the exact whole dollar amount of your refund. sure to wait at least 6 weeks from the date you filed

your return (3 weeks if you filed electronically) and• Download forms, instructions, and publications.have your 2003 tax return available because you will• Order IRS products on-line. need to know your filing status and the exact wholedollar amount of your refund.• See answers to frequently asked tax questions.

• Search publications on-line by topic or keyword.Evaluating the quality of our telephone services. To• Figure your withholding allowances using our Form ensure that IRS representatives give accurate, courteous,

W-4 calculator. and professional answers, we use several methods toevaluate the quality of our telephone services. One method• Send us comments or request help by e-mail.is for a second IRS representative to sometimes listen in• Sign up to receive local and national tax news by on or record telephone calls. Another is to ask some callers

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business. Walk-in. Many products and services are avail-able on a walk-in basis.

You can also reach us using File Transfer Protocol atftp.irs.gov. • Products. You can walk in to many post offices,

libraries, and IRS offices to pick up certain forms,Fax. You can get over 100 of the most requestedinstructions, and publications. Some IRS offices, li-forms and instructions 24 hours a day, 7 days abraries, grocery stores, copy centers, city and countyweek, by fax. Just call 703–368–9694 from yourgovernment offices, credit unions, and office supplyfax machine. Follow the directions from the prompts. Whenstores have a collection of products available to printyou order forms, enter the catalog number for the form youfrom a CD-ROM or photocopy from reproducibleneed. The items you request will be faxed to you.proofs. Also, some IRS offices and libraries have theFor help with transmission problems, cal lInternal Revenue Code, regulations, Internal Reve-703–487–4608.nue Bulletins, and Cumulative Bulletins available forLong-distance charges may apply.research purposes.

Phone. Many services are available by phone. • Services. You can walk in to your local TaxpayerAssistance Center every business day to ask taxquestions or get help with a tax problem. An em-ployee can explain IRS letters, request adjustments• Ordering forms, instructions, and publications. Callto your account, or help you set up a payment plan.1–800–829–3676 to order current-year forms, in-You can set up an appointment by calling your localstructions, and publications and prior-year forms andCenter and, at the prompt, leaving a message re-instructions. You should receive your order within 10questing Everyday Tax Solutions help. A representa-days.tive will call you back within 2 business days to• Asking tax questions. Call the IRS with your tax schedule an in-person appointment at your conve-

questions at 1–800–829–1040. nience. To find the number, go to www.irs.gov or• Solving problems. You can get face-to-face help look in the phone book under “United States Govern-

solving tax problems every business day in IRS Tax- ment, Internal Revenue Service.”

Chapter 5 Page 69



Mail. You can send your order for forms, instruc- CD-ROM for tax products. You can order IRStions, and publications to the Distribution Center Publication 1796, Federal Tax Products onnearest to you and receive a response within 10 CD-ROM, and obtain:

workdays after your request is received. Use the address • Current-year forms, instructions, and publications.that applies to your part of the country.

• Prior-year forms and instructions.• Western part of U.S.:• Frequently requested tax forms that may be filled inWestern Area Distribution Center

electronically, printed out for submission, and savedRancho Cordova, CA 95743–0001for recordkeeping.• Central part of U.S.:

• Internal Revenue Bulletins.Central Area Distribution CenterP.O. Box 8903

Buy the CD-ROM from National Technical InformationBloomington, IL 61702–8903Service (NTIS) on the Internet at www.irs.gov/cdorders for• Eastern part of U.S. and foreign addresses: $22 (no handling fee) or call 1–877–233–6767 toll free to

Eastern Area Distribution Center buy the CD-ROM for $22 (plus a $5 handling fee). The firstP.O. Box 85074 release is available in early January and the final release isRichmond, VA 23261–5074 available in late February.

Copies of Revenue Rulings, Revenue Procedures, CD-ROM for small businesses. IRS PublicationNotices, and Announcements. Copies of individual rev- 3207, Small Business Resource Guide, is a mustenue rulings, revenue procedures, notices, and announce- for every small business owner or any taxpayerments, published in an Internal Revenue Bulletin (IRB), about to start a business. This handy, interactive CD con-can be obtained by writing the IRS Freedom of Information tains all the business tax forms, instructions and publica-Reading Room (FOIA) at the following address: tions needed to successfully manage a business. In

Internal Revenue Service addition, the CD provides an abundance of other helpfulFOIA information, such as how to prepare a business plan,P.O. Box 795 finding financing for your business, and much more. TheBenjamin Franklin Station design of the CD makes finding information easy and quickWashington, D.C. 20044 and incorporates file formats and browsers that can be run

on virtually any desktop or laptop computer.You can also fax your request to the following number: It is available in early April. You can get a free copy by

202–622–5165. calling 1–800–829–3676 or by visiting the web site atRevenue Rulings, Revenue Procedures, Announce- www.irs.gov/smallbiz.

ments, and Notices, issued since January 1996, can beobtained by downloading them from the individual InternalRevenue Bulletin on the www.irs.gov web site.

Copies may also be available in one of the local FederalDepositary Libraries in your community.

Page 70 Chapter 5



Appendices

To help you complete your tax return,use the following appendices that in-clude worksheets, sample forms, andtables.

1. Appendix A — Summary Re-cord of Traditional IRA(s) for2003 and Worksheet For Deter-mining Required Minimum Distri-butions.

2. Appendix B — Worksheets youuse if you receive social securitybenefits and are subject to theIRA deduction phaseout rules. Afilled-in example is included.

a. Worksheet 1, Computation ofModified AGI.

b. Worksheet 2, Computation ofTraditional IRA Deduction.

c. Worksheet 3, Computation ofTaxable Social Security Bene-fits.

d. Comprehensive Example andcompleted worksheets.

3. Appendix C — Life ExpectancyTables. These tables are in-cluded to assist you in computingyour required minimum distribu-tion amount if you have not takenall your assets from all your tradi-tional IRAs before age 701/2.

a. Table I (Single Life Expec-tancy)

b. Table II (Joint Life and LastSurvivor Expectancy)

c. Table III (Uniform Lifetime)

Page 71



APPENDIX A. Summary Record of Traditional IRA(s) for 2003 (Keep for Your Records)

Name ______________________________________I was ❏ covered ❏ not covered by my employer’s retirement plan during the year.I became 591/2 on ______________________________________(month) (day) (year)I became 701/2 on ______________________________________(month) (day) (year)

Contributions

Check if Fair Market Value of IRAAmount contributed for rollover as of December 31, 2003,

Name of traditional IRA Date 2003 contribution from Form 5498

1.

2.

3.

4.

5.

6.

7.

8.

Total

Total contributions deducted on tax return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $Total contributions treated as nondeductible on Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . $

Distributions

Reason (e.g.,retirement,

rollover, Taxableconversion, amount

withdrawal of Income reported onName of Amount of excess earned income tax Nontaxable amount from

traditional IRA Date Distribution contributions) on IRA return Form 8606, line 13

1.

2.

3.

4.

5.

6.

7.

8.

Total

Basis of all traditional IRAs for 2003 and earlier years (from Form 8606, line 14) . . . . . . . . $Note. You should keep copies of your income tax return, and Forms W-2, 8606, and 5498.

Page 72



Appendix A. (Continued) Worksheet For Determining Required Minimum Distributions(Keep for Your Records)

1. Age 701/2 711/2 721/2 731/2 741/2

2. Year age was reached

3. Value of IRA at the close of business onDecember 31 of the year immediately prior to theyear on line 21

4. Distribution period from Table III or life expectancyfrom Life Expectancy Table I or Table II2

5. Required distribution (divide line 3 by line 4)3

1. Age 751/2 761/2 771/2 781/2 791/2





1. Age 801/2 811/2 821/2 831/2 841/2





1. Age 851/2 861/2 871/2 881/2 891/2





1If you have more than one IRA, you must figure the required distribution separately for each IRA.2Use the appropriate life expectancy or distribution period for each year and for each IRA.3If you have more than one IRA, you must withdraw an amount equal to the total of the required distributions figuredfor each IRA. You can, however, withdraw the total from one IRA or from more than one IRA.

Page 73



APPENDIX B. Worksheets for Social Security Recipients Who Contribute to a Traditional IRA

If you receive social security benefits, have taxable compensation, contribute to your traditional IRA, and you or yourspouse is covered by an employer retirement plan, complete the following worksheets. (See Are You Covered by anEmployer Plan? in chapter 1.)Use Worksheet 1 to figure your modified adjusted gross income. This amount is needed in the computation of yourIRA deduction, if any, which is figured using Worksheet 2.The IRA deduction figured using Worksheet 2 is entered on your tax return.

Worksheet 1Computation of Modified AGI(For use only by taxpayers who receive social security benefits)

Filing Status — Check only one box:❏ A. Married filing jointly❏ B. Single, Head of Household, Qualifying Widow(er), or Married filing separately and

lived apart from your spouse during the entire year❏ C. Married filing separately and lived with your spouse at any time during the year

1. Adjusted gross income (AGI) from Form 1040 or Form 1040A (not taking into accountany social security benefits from Form SSA-1099 or RRB-1099, any deduction forcontributions to a traditional IRA, any student loan interest deduction, any tuition and feesdeduction, or any exclusion of interest from savings bonds to be reported on Form 8815) 1.

2. Enter the amount in box 5 of all Forms SSA-1099 and Forms RRB-1099 . . . . . . . . . . . . . 2.3. Enter one-half of line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Enter the amount of any foreign earned income exclusion, foreign housing exclusion,

U.S. possessions income exclusion, exclusion of income from Puerto Rico you claimedas a bona fide resident of Puerto Rico, or exclusion of employer-provided adoptionbenefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

5. Enter the amount of any tax-exempt interest reported on line 8b of Form 1040 or 1040A 5.6. Add lines 1, 3, 4, and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7. Enter the amount listed below for your filing status.

• $32,000 if you checked box A above• $25,000 if you checked box B above• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Subtract line 7 from line 6. If zero or less, enter 0 on this line . . . . . . . . . . . . . . . . . . . . . . 8.9. If line 8 is zero, stop here. None of your social security benefits are taxable.

If line 8 is more than 0, enter the amount listed below for your filing status.• $12,000 if you checked box A above• $9,000 if you checked box B above• $0 if you checked box C above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.

10. Subtract line 9 from line 8. If zero or less, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.11. Enter the smaller of line 8 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12. Enter one half of line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter the smaller of line 3 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Multiply line 10 by .85. If line 10 is zero, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Add lines 13 and 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Multiply line 2 by .85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Taxable benefits to be included in modified AGI for traditional IRA deduction purposes.

Enter the smaller of line 15 or line 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18. Enter the amount of any employer-provided adoption benefits exclusion and any foreign

earned income exclusion and foreign housing exclusion or deduction that you claimed . . 18.19. Modified AGI for determining your reduced traditional IRA deduction – add lines 1, 17,

and 18. Enter here and on line 2 of Worksheet 2, next . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.

Page 74



APPENDIX B. (Continued)

Worksheet 2Computation of Traditional IRA Deduction(For use only by taxpayers who receive social security benefits)

AND your THEN enterIF your filing status modified AGI on line 1is ... is over ... below ...

married filing jointlyAND

•you are coveredby a retirementplan at work, or $60,000* $70,000

•you are notcovered by anemployer planbut your spouseis $150,000* $160,000

single, or head ofhousehold $40,000* $50,000

married filingseparately** $0* $10,000

qualifying widower(er) $60,000* $70,000

*If your modified AGI is not over this amount, you can take an IRA deduction for yourcontributions of up to the lesser of $3,000 ($3,500 if you are 50 or older) or your taxablecompensation. Skip this worksheet, proceed to Worksheet 3, and enter your IRA deduction online 2 of Worksheet 3.**If you did not live with your spouse at any time during the year, consider your filing status assingle.Note: If you were married and you or your spouse worked and you both contributed to IRAs,figure the deduction for each of you separately.

1. Enter the applicable amount from above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2. Enter your modified AGI from Worksheet 1, line 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.Note: If line 2 is equal to or more than the amount on line 1, stop here; your traditional IRA

contributions are not deductible. Proceed to Worksheet 3.3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Multiply line 3 by 30% (.30) (by 35% (.35) if age 50 or older). If the result is not a multiple of

$10, round it to the next highest multiple of $10. (For example, $611.40 is rounded to $620.)However, if the result is less than $200, enter $200. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

5. Enter your compensation minus any deductions on Form 1040, line 28 (one-half ofself-employment tax) and line 30 (self-employed SEP, SIMPLE, and qualified plans). (If youare the lower income spouse, include your spouse’s compensation reduced by his or hertraditional IRA and Roth IRA contributions for this year.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.

6. Enter contributions you made, or plan to make, to your traditional IRA for 2003, but do notenter more than $3,000 ($3,500 if 50 or older) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Deduction. Compare lines 4, 5, and 6. Enter the smallest amount here (or a smalleramount if you choose). Enter this amount on the Form 1040 or 1040A line for your IRA. (Ifthe amount on line 6 is more than the amount on line 7, complete line 8.) . . . . . . . . . . . . . . 7.

8. Nondeductible contributions. Subtract line 7 from line 5 or 6, whichever is smaller. Enterthe result here and on line 1 of your Form 8606, Nondeductible IRAs. . . . . . . . . . . . . . . . . . 8.

Page 75




Worksheet 3Computation of Taxable Social Security Benefits(For use by taxpayers who receive social security benefits and take a traditional IRAdeduction)

Filing Status — Check only one box:

❏ A. Married filing jointly

❏ B. Single, Head of Household, Qualifying Widow(er), or Married filing separately and lived apart from your spouse during the entire year

❏ C. Married filing separately and lived with your spouse at any time during the year

1. Adjusted gross income (AGI) from Form 1040 or Form 1040A (not taking intoaccount any IRA deduction, any student loan interest deduction, any tuition and feesdeduction, any social security benefits from Form SSA-1099 or RRB-1099, or anyexclusion of interest from savings bonds to be reported on Form 8815) . . . . . . . . . . 1.

2. Deduction(s) from line 7 of Worksheet(s) 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Enter amount in box 5 of all Forms SSA-1099 and Forms RRB-1099 . . . . . . . . . . . . 4.5. Enter one half of line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Enter the amount of any foreign earned income exclusion, foreign housing exclusion,

exclusion of income from U.S. possessions, exclusion of income from Puerto Ricoyou claimed as a bona fide resident of Puerto Rico, or exclusion ofemployer-provided adoption benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Enter the amount of any tax-exempt interest reported on line 8b of Form 1040 or1040A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Add lines 3, 5, 6, and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9. Enter the amount listed below for your filing status.

• $32,000 if you checked box A above.• $25,000 if you checked box B above.• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.

10. Subtract line 9 from line 8. If zero or less, enter 0 on this line. . . . . . . . . . . . . . . . . . . 10.11. If line 10 is zero, stop here. None of your social security benefits are taxable.

If line 10 is more than 0, enter the amount listed below for your filing status.• $12,000 if you checked box A above.• $9,000 if you checked box B above.• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Subtract line 11 from line 10. If zero or less, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . 12.13. Enter the smaller of line 10 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.14. Enter one-half of line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15. Enter the smaller of line 5 or line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16. Multiply line 12 by .85. If line 12 is zero, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.17. Add lines 15 and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18. Multiply line 4 by .85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.19. Taxable social security benefits. Enter the smaller of line 17 or line 18 . . . . . . . . . 19.

Page 76




Comprehensive ExampleDetermining Your Traditional IRA Deduction andthe Taxable Portion of Your Social Security Benefits

John Black is married and files a joint return. He is 65 years old and had 2003 wages of $53,500. His wife didnot work in 2003. He also received social security benefits of $10,000 and made a $3,500 contribution to histraditional IRA for the year. He had no foreign income, no tax-exempt interest, and no adjustments to income on lines23 through 33 on his Form 1040. He participated in a section 401(k) retirement plan at work.

John completes worksheets 1 and 2. Worksheet 2 shows that his 2003 IRA deduction is $2,800. He must eitherwithdraw the contributions that are more than the deduction (the $700 shown on line 8 of Worksheet 2), or treat theexcess amounts as nondeductible contributions (in which case he must complete Form 8606 and attach it to hisForm 1040).

The completed worksheets that follow show how John figured his modified AGI to determine the IRA deductionand the taxable social security benefits to report on his Form 1040.

Worksheet 1Computation of Modified AGI(For use only by taxpayers who receive social security benefits)

Filing Status — Check only one box:� A. Married filing jointly❏ B. Single, Head of Household, Qualifying Widow(er), or Married filing separately and lived apartfrom your spouse during the entire year❏ C. Married filing separately and lived with your spouse at any time during the year

1. Adjusted gross income (AGI) from Form 1040 or Form 1040A (not taking into account any socialsecurity benefits from Form SSA-1099 or RRB-1099, any deduction for contributions to a traditionalIRA, any student loan interest deduction, any tuition and fees deduction, or any exclusion of interestfrom savings bonds to be reported on Form 8815) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,500

2. Enter the amount in box 5 of all Forms SSA-1099 and Forms RRB-1099 . . . . . . . . . . . . . . . . . . . . . . 10,0003. Enter one half of line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,0004. Enter the amount of any foreign earned income exclusion, foreign housing exclusion, U.S.

possessions income exclusion, exclusion of income from Puerto Rico you claimed as a bona fideresident of Puerto Rico, or exclusion of employer-provided adoption benefits . . . . . . . . . . . . . . . . . . 0

5. Enter the amount of any tax-exempt interest reported on line 8b of Form 1040 or 1040A . . . . . . . . . . 06. Add lines 1, 3, 4, and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,5007. Enter the amount listed below for your filing status.

• $32,000 if you checked box A above• $25,000 if you checked box B above• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000

8. Subtract line 7 from line 6. If zero or less, enter 0 on this line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,5009. If line 8 is zero, stop here. None of your social security benefits are taxable. If line 8 is more than 0,

enter the amount listed below for your filing status.• $12,000 if you checked box A above.• $9,000 if you checked box B above.• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

10. Subtract line 9 from line 8. If zero or less, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,50011. Enter the smaller of line 8 or line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

Page 77




12. Enter one half of line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,00013. Enter the smaller of line 3 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,00014. Multiply line 10 by .85. If line 10 is zero, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,32515. Add lines 13 and 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,32516. Multiply line 2 by .85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,50017. Taxable benefits to be included in Modified AGI for traditional IRA deduction purposes.

Enter the smaller of line 15 or line 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,50018. Enter the amount of any employer-provided adoption benefits exclusion and any foreign earned

income exclusion and foreign housing exclusion or deduction that you claimed . . . . . . . . . . . . . . . 019. Modified AGI for determining your reduced traditional IRA deduction – add lines 1, 17, and 18.

Enter here and on line 2 of Worksheet 2, next . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,000

Page 78




Worksheet 2Computation of Traditional IRA Deduction(For use only by taxpayers who receive social security benefits)

THEN enterAND your modified on line 1

IF your filing status is ... AGI is over ... below ...

married filing jointly orqualifying widower(er) $60,000* $70,000

married filing jointly (youare not covered by anemployer plan but yourspouse is) $150,000* $160,000

single, or head ofhousehold $40,000* $50,000

married filing separately** $0* $10,000

*If your modified AGI is not over this amount, you can take an IRA deduction for your contributions of up to thelesser of $3,000 ($3,500 if you are 50 or older) or your taxable compensation. Skip this worksheet, proceed toWorksheet 3, and enter your IRA deduction on line 2 of Worksheet 3.**If you did not live with your spouse at any time during the year, consider your filing status as single.Note: If you were married and you or your spouse worked and you both contributed to IRAs, figure the deductionfor each of you separately.

1. Enter the applicable amount from above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,0002. Enter your modified AGI from Worksheet 1, line 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,000Note: If line 2 is equal to or more than the amount on line 1, stop here; your traditional IRA

contributions are not deductible. Proceed to Worksheet 3.3. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,0004. Multiply line 3 by 30% (.30) (by 35% (.35) if age 50 or older). If the result is not a multiple of $10,

round it to the next highest multiple of $10. (For example, $611.40 is rounded to $620.) However, ifthe result is less than $200, enter $200. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800

5. Enter your compensation minus any deductions on Form 1040, line 28 (one-half ofself-employment tax) and line 30 (self-employed SEP, SIMPLE, and qualified plans). (If you are thelower income spouse, include your spouse’s compensation reduced by his or her traditional IRAand Roth IRA contributions for this year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,500

6. Enter contributions you made, or plan to make, to your traditional IRA for 2003, but do not entermore than $3,000 ($3,500 if 50 or older) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500

7. Deduction. Compare lines 4, 5, and 6. Enter the smallest amount here (or a smaller amount if youchoose). Enter this amount on the Form 1040 or 1040A line for your IRA. (If the amount on line 6 ismore than the amount on line 7, complete line 8.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800

8. Nondeductible contributions. Subtract line 7 from line 5 or 6, whichever is smaller. Enter theresult here and on line 1 of your Form 8606, Nondeductible IRAs. . . . . . . . . . . . . . . . . . . . . . . . . . 700

Page 79




Worksheet 3Computation of Taxable Social Security Benefits(For use by taxpayers who receive social security benefits and take a traditional IRA deduction)

Filing Status — Check only one box:� A. Married filing jointly❏ B. Single, Head of Household, Qualifying Widow(er), or Married filing separately and

lived apart from your spouse during the entire year❏ C. Married filing separately and lived with your spouse at any time during the year

1. Adjusted gross income (AGI) from Form 1040 or Form 1040A (not taking into account any IRAdeduction, any student loan interest deduction, any tuition and fees deduction, any socialsecurity benefits from Form SSA-1099 or RRB-1099, or any exclusion of interest from savingsbonds to be reported on Form 8815) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,500

2. Deduction(s) from line 7 of Worksheet(s) 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,8003. Subtract line 2 from line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,7004. Enter amount in box 5 of all Forms SSA-1099 and Forms RRB-1099 . . . . . . . . . . . . . . . . . . . . . . 10,0005. Enter one half of line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,0006. Enter the amount of any foreign earned income exclusion, foreign housing exclusion, exclusion

of income from U.S. possessions, exclusion of income from Puerto Rico you claimed as a bonafide resident of Puerto Rico, or exclusion of employer-provided adoption benefits . . . . . . . . . . . . 0

7. Enter the amount of any tax-exempt interest reported on line 8b of Form 1040 or 1040A . . . . . . . 08. Add lines 3, 5, 6, and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,7009. Enter the amount listed below for your filing status.

• $32,000 if you checked box A above.• $25,000 if you checked box B above.• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000

10. Subtract line 9 from line 8. If zero or less, enter 0 on this line. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,70011. If line 10 is zero, stop here. None of your social security benefits are taxable.

If line 10 is more than 0, enter the amount listed below for your filing status.• $12,000 if you checked box A above.• $9,000 if you checked box B above.• $0 if you checked box C above. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

12. Subtract line 11 from line 10. If zero or less, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,70013. Enter the smaller of line 10 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,00014. Enter one half of line 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,00015. Enter the smaller of line 5 or line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,00016. Multiply line 12 by .85. If line 12 is zero, enter 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,94517. Add lines 15 and 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,94518. Multiply line 4 by .85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,50019. Taxable social security benefits. Enter the smaller of line 17 or line 18 . . . . . . . . . . . . . . . . . . . 8,500

Page 80



APPENDIX C. Life Expectancy Tables

Table I(Single Life Expectancy)

(For Use by Beneficiaries)

Age Life Expectancy Age Life Expectancy

0 82.4 28 55.31 81.6 29 54.32 80.6 30 53.33 79.7 31 52.44 78.7 32 51.4

5 77.7 33 50.46 76.7 34 49.47 75.8 35 48.58 74.8 36 47.59 73.8 37 46.5

10 72.8 38 45.611 71.8 39 44.612 70.8 40 43.613 69.9 41 42.714 68.9 42 41.7

15 67.9 43 40.716 66.9 44 39.817 66.0 45 38.818 65.0 46 37.919 64.0 47 37.0

20 63.0 48 36.021 62.1 49 35.122 61.1 50 34.223 60.1 51 33.324 59.1 52 32.3

25 58.2 53 31.426 57.2 54 30.527 56.2 55 29.6

Page 81



APPENDIX C. (Continued)

Table I(Single Life Expectancy)

(For Use by Beneficiaries)

Age Life Expectancy Age Life Expectancy

56 28.7 84 8.157 27.9 85 7.658 27.0 86 7.159 26.1 87 6.760 25.2 88 6.3

61 24.4 89 5.962 23.5 90 5.563 22.7 91 5.264 21.8 92 4.965 21.0 93 4.6

66 20.2 94 4.367 19.4 95 4.168 18.6 96 3.869 17.8 97 3.670 17.0 98 3.4

71 16.3 99 3.172 15.5 100 2.973 14.8 101 2.774 14.1 102 2.575 13.4 103 2.3

76 12.7 104 2.177 12.1 105 1.978 11.4 106 1.779 10.8 107 1.580 10.2 108 1.4

81 9.7 109 1.282 9.1 110 1.183 8.6 111 and over 1.0

Page 82



Appendix C. Life Expectancy Tables (Continued)

Table II(Joint Life and Last Survivor Expectancy)

(For Use by Owners Whose Spouses Are More Than 10 Years Younger and Are the Sole Beneficiaries of their IRAs)

Ages 20 21 22 23 24 25 26 27 28 29

20 70.1 69.6 69.1 68.7 68.3 67.9 67.5 67.2 66.9 66.621 69.6 69.1 68.6 68.2 67.7 67.3 66.9 66.6 66.2 65.922 69.1 68.6 68.1 67.6 67.2 66.7 66.3 65.9 65.6 65.223 68.7 68.2 67.6 67.1 66.6 66.2 65.7 65.3 64.9 64.624 68.3 67.7 67.2 66.6 66.1 65.6 65.2 64.7 64.3 63.9

25 67.9 67.3 66.7 66.2 65.6 65.1 64.6 64.2 63.7 63.326 67.5 66.9 66.3 65.7 65.2 64.6 64.1 63.6 63.2 62.827 67.2 66.6 65.9 65.3 64.7 64.2 63.6 63.1 62.7 62.228 66.9 66.2 65.6 64.9 64.3 63.7 63.2 62.7 62.1 61.729 66.6 65.9 65.2 64.6 63.9 63.3 62.8 62.2 61.7 61.2

30 66.3 65.6 64.9 64.2 63.6 62.9 62.3 61.8 61.2 60.731 66.1 65.3 64.6 63.9 63.2 62.6 62.0 61.4 60.8 60.232 65.8 65.1 64.3 63.6 62.9 62.2 61.6 61.0 60.4 59.833 65.6 64.8 64.1 63.3 62.6 61.9 61.3 60.6 60.0 59.434 65.4 64.6 63.8 63.1 62.3 61.6 60.9 60.3 59.6 59.0

35 65.2 64.4 63.6 62.8 62.1 61.4 60.6 59.9 59.3 58.636 65.0 64.2 63.4 62.6 61.9 61.1 60.4 59.6 59.0 58.337 64.9 64.0 63.2 62.4 61.6 60.9 60.1 59.4 58.7 58.038 64.7 63.9 63.0 62.2 61.4 60.6 59.9 59.1 58.4 57.739 64.6 63.7 62.9 62.1 61.2 60.4 59.6 58.9 58.1 57.4

40 64.4 63.6 62.7 61.9 61.1 60.2 59.4 58.7 57.9 57.141 64.3 63.5 62.6 61.7 60.9 60.1 59.3 58.5 57.7 56.942 64.2 63.3 62.5 61.6 60.8 59.9 59.1 58.3 57.5 56.743 64.1 63.2 62.4 61.5 60.6 59.8 58.9 58.1 57.3 56.544 64.0 63.1 62.2 61.4 60.5 59.6 58.8 57.9 57.1 56.3

45 64.0 63.0 62.2 61.3 60.4 59.5 58.6 57.8 56.9 56.146 63.9 63.0 62.1 61.2 60.3 59.4 58.5 57.7 56.8 56.047 63.8 62.9 62.0 61.1 60.2 59.3 58.4 57.5 56.7 55.848 63.7 62.8 61.9 61.0 60.1 59.2 58.3 57.4 56.5 55.749 63.7 62.8 61.8 60.9 60.0 59.1 58.2 57.3 56.4 55.6

50 63.6 62.7 61.8 60.8 59.9 59.0 58.1 57.2 56.3 55.451 63.6 62.6 61.7 60.8 59.9 58.9 58.0 57.1 56.2 55.352 63.5 62.6 61.7 60.7 59.8 58.9 58.0 57.1 56.1 55.253 63.5 62.5 61.6 60.7 59.7 58.8 57.9 57.0 56.1 55.254 63.5 62.5 61.6 60.6 59.7 58.8 57.8 56.9 56.0 55.1

55 63.4 62.5 61.5 60.6 59.6 58.7 57.8 56.8 55.9 55.056 63.4 62.4 61.5 60.5 59.6 58.7 57.7 56.8 55.9 54.957 63.4 62.4 61.5 60.5 59.6 58.6 57.7 56.7 55.8 54.958 63.3 62.4 61.4 60.5 59.5 58.6 57.6 56.7 55.8 54.859 63.3 62.3 61.4 60.4 59.5 58.5 57.6 56.7 55.7 54.8

Page 83



Appendix C. (Continued)

Table II (continued)(Joint Life and Last Survivor Expectancy)


Ages 20 21 22 23 24 25 26 27 28 29

60 63.3 62.3 61.4 60.4 59.5 58.5 57.6 56.6 55.7 54.761 63.3 62.3 61.3 60.4 59.4 58.5 57.5 56.6 55.6 54.762 63.2 62.3 61.3 60.4 59.4 58.4 57.5 56.5 55.6 54.763 63.2 62.3 61.3 60.3 59.4 58.4 57.5 56.5 55.6 54.664 63.2 62.2 61.3 60.3 59.4 58.4 57.4 56.5 55.5 54.6

65 63.2 62.2 61.3 60.3 59.3 58.4 57.4 56.5 55.5 54.666 63.2 62.2 61.2 60.3 59.3 58.4 57.4 56.4 55.5 54.567 63.2 62.2 61.2 60.3 59.3 58.3 57.4 56.4 55.5 54.568 63.1 62.2 61.2 60.2 59.3 58.3 57.4 56.4 55.4 54.569 63.1 62.2 61.2 60.2 59.3 58.3 57.3 56.4 55.4 54.5

70 63.1 62.2 61.2 60.2 59.3 58.3 57.3 56.4 55.4 54.471 63.1 62.1 61.2 60.2 59.2 58.3 57.3 56.4 55.4 54.472 63.1 62.1 61.2 60.2 59.2 58.3 57.3 56.3 55.4 54.473 63.1 62.1 61.2 60.2 59.2 58.3 57.3 56.3 55.4 54.474 63.1 62.1 61.2 60.2 59.2 58.2 57.3 56.3 55.4 54.4

75 63.1 62.1 61.1 60.2 59.2 58.2 57.3 56.3 55.3 54.476 63.1 62.1 61.1 60.2 59.2 58.2 57.3 56.3 55.3 54.477 63.1 62.1 61.1 60.2 59.2 58.2 57.3 56.3 55.3 54.478 63.1 62.1 61.1 60.2 59.2 58.2 57.3 56.3 55.3 54.479 63.1 62.1 61.1 60.2 59.2 58.2 57.2 56.3 55.3 54.3

80 63.1 62.1 61.1 60.1 59.2 58.2 57.2 56.3 55.3 54.381 63.1 62.1 61.1 60.1 59.2 58.2 57.2 56.3 55.3 54.382 63.1 62.1 61.1 60.1 59.2 58.2 57.2 56.3 55.3 54.383 63.1 62.1 61.1 60.1 59.2 58.2 57.2 56.3 55.3 54.384 63.0 62.1 61.1 60.1 59.2 58.2 57.2 56.3 55.3 54.3

85 63.0 62.1 61.1 60.1 59.2 58.2 57.2 56.3 55.3 54.386 63.0 62.1 61.1 60.1 59.2 58.2 57.2 56.2 55.3 54.387 63.0 62.1 61.1 60.1 59.2 58.2 57.2 56.2 55.3 54.388 63.0 62.1 61.1 60.1 59.2 58.2 57.2 56.2 55.3 54.389 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3

90 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.391 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.392 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.393 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.394 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3

95 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.396 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.397 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.398 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.399 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3

Page 84






Ages 20 21 22 23 24 25 26 27 28 29

100 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3101 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3102 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3103 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3104 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3

105 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3106 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3107 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3108 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3109 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3

110 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3111 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3112 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3113 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3114 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3

115+ 63.0 62.1 61.1 60.1 59.1 58.2 57.2 56.2 55.3 54.3



Ages 30 31 32 33 34 35 36 37 38 39

30 60.2 59.7 59.2 58.8 58.4 58.0 57.6 57.3 57.0 56.731 59.7 59.2 58.7 58.2 57.8 57.4 57.0 56.6 56.3 56.032 59.2 58.7 58.2 57.7 57.2 56.8 56.4 56.0 55.6 55.333 58.8 58.2 57.7 57.2 56.7 56.2 55.8 55.4 55.0 54.734 58.4 57.8 57.2 56.7 56.2 55.7 55.3 54.8 54.4 54.0

35 58.0 57.4 56.8 56.2 55.7 55.2 54.7 54.3 53.8 53.436 57.6 57.0 56.4 55.8 55.3 54.7 54.2 53.7 53.3 52.837 57.3 56.6 56.0 55.4 54.8 54.3 53.7 53.2 52.7 52.338 57.0 56.3 55.6 55.0 54.4 53.8 53.3 52.7 52.2 51.739 56.7 56.0 55.3 54.7 54.0 53.4 52.8 52.3 51.7 51.2

40 56.4 55.7 55.0 54.3 53.7 53.0 52.4 51.8 51.3 50.841 56.1 55.4 54.7 54.0 53.3 52.7 52.0 51.4 50.9 50.342 55.9 55.2 54.4 53.7 53.0 52.3 51.7 51.1 50.4 49.943 55.7 54.9 54.2 53.4 52.7 52.0 51.3 50.7 50.1 49.544 55.5 54.7 53.9 53.2 52.4 51.7 51.0 50.4 49.7 49.1

45 55.3 54.5 53.7 52.9 52.2 51.5 50.7 50.0 49.4 48.746 55.1 54.3 53.5 52.7 52.0 51.2 50.5 49.8 49.1 48.447 55.0 54.1 53.3 52.5 51.7 51.0 50.2 49.5 48.8 48.148 54.8 54.0 53.2 52.3 51.5 50.8 50.0 49.2 48.5 47.8

Page 85






Ages 30 31 32 33 34 35 36 37 38 39

49 54.7 53.8 53.0 52.2 51.4 50.6 49.8 49.0 48.2 47.5

50 54.6 53.7 52.9 52.0 51.2 50.4 49.6 48.8 48.0 47.351 54.5 53.6 52.7 51.9 51.0 50.2 49.4 48.6 47.8 47.052 54.4 53.5 52.6 51.7 50.9 50.0 49.2 48.4 47.6 46.853 54.3 53.4 52.5 51.6 50.8 49.9 49.1 48.2 47.4 46.654 54.2 53.3 52.4 51.5 50.6 49.8 48.9 48.1 47.2 46.4

55 54.1 53.2 52.3 51.4 50.5 49.7 48.8 47.9 47.1 46.356 54.0 53.1 52.2 51.3 50.4 49.5 48.7 47.8 47.0 46.157 54.0 53.0 52.1 51.2 50.3 49.4 48.6 47.7 46.8 46.058 53.9 53.0 52.1 51.2 50.3 49.4 48.5 47.6 46.7 45.859 53.8 52.9 52.0 51.1 50.2 49.3 48.4 47.5 46.6 45.7

60 53.8 52.9 51.9 51.0 50.1 49.2 48.3 47.4 46.5 45.661 53.8 52.8 51.9 51.0 50.0 49.1 48.2 47.3 46.4 45.562 53.7 52.8 51.8 50.9 50.0 49.1 48.1 47.2 46.3 45.463 53.7 52.7 51.8 50.9 49.9 49.0 48.1 47.2 46.3 45.364 53.6 52.7 51.8 50.8 49.9 48.9 48.0 47.1 46.2 45.3

65 53.6 52.7 51.7 50.8 49.8 48.9 48.0 47.0 46.1 45.266 53.6 52.6 51.7 50.7 49.8 48.9 47.9 47.0 46.1 45.167 53.6 52.6 51.7 50.7 49.8 48.8 47.9 46.9 46.0 45.168 53.5 52.6 51.6 50.7 49.7 48.8 47.8 46.9 46.0 45.069 53.5 52.6 51.6 50.6 49.7 48.7 47.8 46.9 45.9 45.0

70 53.5 52.5 51.6 50.6 49.7 48.7 47.8 46.8 45.9 44.971 53.5 52.5 51.6 50.6 49.6 48.7 47.7 46.8 45.9 44.972 53.5 52.5 51.5 50.6 49.6 48.7 47.7 46.8 45.8 44.973 53.4 52.5 51.5 50.6 49.6 48.6 47.7 46.7 45.8 44.874 53.4 52.5 51.5 50.5 49.6 48.6 47.7 46.7 45.8 44.8

75 53.4 52.5 51.5 50.5 49.6 48.6 47.7 46.7 45.7 44.876 53.4 52.4 51.5 50.5 49.6 48.6 47.6 46.7 45.7 44.877 53.4 52.4 51.5 50.5 49.5 48.6 47.6 46.7 45.7 44.878 53.4 52.4 51.5 50.5 49.5 48.6 47.6 46.6 45.7 44.779 53.4 52.4 51.5 50.5 49.5 48.6 47.6 46.6 45.7 44.7

80 53.4 52.4 51.4 50.5 49.5 48.5 47.6 46.6 45.7 44.781 53.4 52.4 51.4 50.5 49.5 48.5 47.6 46.6 45.7 44.782 53.4 52.4 51.4 50.5 49.5 48.5 47.6 46.6 45.6 44.783 53.4 52.4 51.4 50.5 49.5 48.5 47.6 46.6 45.6 44.784 53.4 52.4 51.4 50.5 49.5 48.5 47.6 46.6 45.6 44.7

85 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.786 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.687 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.688 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.6

Page 86






Ages 30 31 32 33 34 35 36 37 38 39

89 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.6

90 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.691 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.692 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.693 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.694 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.6 45.6 44.6

95 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.696 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.697 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.698 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.699 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.6

100 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.6101 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.6102 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.6103 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.6104 53.3 52.4 51.4 50.4 49.5 48.5 47.5 46.5 45.6 44.6

105 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6106 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6107 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6108 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6109 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6

110 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6111 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6112 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6113 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6114 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6

115+ 53.3 52.4 51.4 50.4 49.4 48.5 47.5 46.5 45.6 44.6



Ages 40 41 42 43 44 45 46 47 48 49

40 50.2 49.8 49.3 48.9 48.5 48.1 47.7 47.4 47.1 46.841 49.8 49.3 48.8 48.3 47.9 47.5 47.1 46.7 46.4 46.142 49.3 48.8 48.3 47.8 47.3 46.9 46.5 46.1 45.8 45.443 48.9 48.3 47.8 47.3 46.8 46.3 45.9 45.5 45.1 44.844 48.5 47.9 47.3 46.8 46.3 45.8 45.4 44.9 44.5 44.2

45 48.1 47.5 46.9 46.3 45.8 45.3 44.8 44.4 44.0 43.646 47.7 47.1 46.5 45.9 45.4 44.8 44.3 43.9 43.4 43.047 47.4 46.7 46.1 45.5 44.9 44.4 43.9 43.4 42.9 42.4

Page 87






Ages 40 41 42 43 44 45 46 47 48 49

48 47.1 46.4 45.8 45.1 44.5 44.0 43.4 42.9 42.4 41.949 46.8 46.1 45.4 44.8 44.2 43.6 43.0 42.4 41.9 41.4

50 46.5 45.8 45.1 44.4 43.8 43.2 42.6 42.0 41.5 40.951 46.3 45.5 44.8 44.1 43.5 42.8 42.2 41.6 41.0 40.552 46.0 45.3 44.6 43.8 43.2 42.5 41.8 41.2 40.6 40.153 45.8 45.1 44.3 43.6 42.9 42.2 41.5 40.9 40.3 39.754 45.6 44.8 44.1 43.3 42.6 41.9 41.2 40.5 39.9 39.3

55 45.5 44.7 43.9 43.1 42.4 41.6 40.9 40.2 39.6 38.956 45.3 44.5 43.7 42.9 42.1 41.4 40.7 40.0 39.3 38.657 45.1 44.3 43.5 42.7 41.9 41.2 40.4 39.7 39.0 38.358 45.0 44.2 43.3 42.5 41.7 40.9 40.2 39.4 38.7 38.059 44.9 44.0 43.2 42.4 41.5 40.7 40.0 39.2 38.5 37.8

60 44.7 43.9 43.0 42.2 41.4 40.6 39.8 39.0 38.2 37.561 44.6 43.8 42.9 42.1 41.2 40.4 39.6 38.8 38.0 37.362 44.5 43.7 42.8 41.9 41.1 40.3 39.4 38.6 37.8 37.163 44.5 43.6 42.7 41.8 41.0 40.1 39.3 38.5 37.7 36.964 44.4 43.5 42.6 41.7 40.8 40.0 39.2 38.3 37.5 36.7

65 44.3 43.4 42.5 41.6 40.7 39.9 39.0 38.2 37.4 36.666 44.2 43.3 42.4 41.5 40.6 39.8 38.9 38.1 37.2 36.467 44.2 43.3 42.3 41.4 40.6 39.7 38.8 38.0 37.1 36.368 44.1 43.2 42.3 41.4 40.5 39.6 38.7 37.9 37.0 36.269 44.1 43.1 42.2 41.3 40.4 39.5 38.6 37.8 36.9 36.0

70 44.0 43.1 42.2 41.3 40.3 39.4 38.6 37.7 36.8 35.971 44.0 43.0 42.1 41.2 40.3 39.4 38.5 37.6 36.7 35.972 43.9 43.0 42.1 41.1 40.2 39.3 38.4 37.5 36.6 35.873 43.9 43.0 42.0 41.1 40.2 39.3 38.4 37.5 36.6 35.774 43.9 42.9 42.0 41.1 40.1 39.2 38.3 37.4 36.5 35.6

75 43.8 42.9 42.0 41.0 40.1 39.2 38.3 37.4 36.5 35.676 43.8 42.9 41.9 41.0 40.1 39.1 38.2 37.3 36.4 35.577 43.8 42.9 41.9 41.0 40.0 39.1 38.2 37.3 36.4 35.578 43.8 42.8 41.9 40.9 40.0 39.1 38.2 37.2 36.3 35.479 43.8 42.8 41.9 40.9 40.0 39.1 38.1 37.2 36.3 35.4

80 43.7 42.8 41.8 40.9 40.0 39.0 38.1 37.2 36.3 35.481 43.7 42.8 41.8 40.9 39.9 39.0 38.1 37.2 36.2 35.382 43.7 42.8 41.8 40.9 39.9 39.0 38.1 37.1 36.2 35.383 43.7 42.8 41.8 40.9 39.9 39.0 38.0 37.1 36.2 35.384 43.7 42.7 41.8 40.8 39.9 39.0 38.0 37.1 36.2 35.3

85 43.7 42.7 41.8 40.8 39.9 38.9 38.0 37.1 36.2 35.286 43.7 42.7 41.8 40.8 39.9 38.9 38.0 37.1 36.1 35.287 43.7 42.7 41.8 40.8 39.9 38.9 38.0 37.0 36.1 35.2

Page 88






Ages 40 41 42 43 44 45 46 47 48 49

88 43.7 42.7 41.8 40.8 39.9 38.9 38.0 37.0 36.1 35.289 43.7 42.7 41.7 40.8 39.8 38.9 38.0 37.0 36.1 35.2

90 43.7 42.7 41.7 40.8 39.8 38.9 38.0 37.0 36.1 35.291 43.7 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.292 43.7 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.193 43.7 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.194 43.7 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.1

95 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.196 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.197 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.1 35.198 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.0 35.199 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.0 35.1

100 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.0 35.1101 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.0 35.1102 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.0 35.1103 43.6 42.7 41.7 40.8 39.8 38.9 37.9 37.0 36.0 35.1104 43.6 42.7 41.7 40.8 39.8 38.8 37.9 37.0 36.0 35.1

105 43.6 42.7 41.7 40.8 39.8 38.8 37.9 37.0 36.0 35.1106 43.6 42.7 41.7 40.8 39.8 38.8 37.9 37.0 36.0 35.1107 43.6 42.7 41.7 40.8 39.8 38.8 37.9 37.0 36.0 35.1108 43.6 42.7 41.7 40.8 39.8 38.8 37.9 37.0 36.0 35.1109 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1

110 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1111 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1112 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1113 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1114 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1

115+ 43.6 42.7 41.7 40.7 39.8 38.8 37.9 37.0 36.0 35.1



Ages 50 51 52 53 54 55 56 57 58 59

50 40.4 40.0 39.5 39.1 38.7 38.3 38.0 37.6 37.3 37.151 40.0 39.5 39.0 38.5 38.1 37.7 37.4 37.0 36.7 36.452 39.5 39.0 38.5 38.0 37.6 37.2 36.8 36.4 36.0 35.753 39.1 38.5 38.0 37.5 37.1 36.6 36.2 35.8 35.4 35.154 38.7 38.1 37.6 37.1 36.6 36.1 35.7 35.2 34.8 34.5

55 38.3 37.7 37.2 36.6 36.1 35.6 35.1 34.7 34.3 33.956 38.0 37.4 36.8 36.2 35.7 35.1 34.7 34.2 33.7 33.3

Page 89






Ages 50 51 52 53 54 55 56 57 58 59

57 37.6 37.0 36.4 35.8 35.2 34.7 34.2 33.7 33.2 32.858 37.3 36.7 36.0 35.4 34.8 34.3 33.7 33.2 32.8 32.359 37.1 36.4 35.7 35.1 34.5 33.9 33.3 32.8 32.3 31.8

60 36.8 36.1 35.4 34.8 34.1 33.5 32.9 32.4 31.9 31.361 36.6 35.8 35.1 34.5 33.8 33.2 32.6 32.0 31.4 30.962 36.3 35.6 34.9 34.2 33.5 32.9 32.2 31.6 31.1 30.563 36.1 35.4 34.6 33.9 33.2 32.6 31.9 31.3 30.7 30.164 35.9 35.2 34.4 33.7 33.0 32.3 31.6 31.0 30.4 29.8

65 35.8 35.0 34.2 33.5 32.7 32.0 31.4 30.7 30.0 29.466 35.6 34.8 34.0 33.3 32.5 31.8 31.1 30.4 29.8 29.167 35.5 34.7 33.9 33.1 32.3 31.6 30.9 30.2 29.5 28.868 35.3 34.5 33.7 32.9 32.1 31.4 30.7 29.9 29.2 28.669 35.2 34.4 33.6 32.8 32.0 31.2 30.5 29.7 29.0 28.3

70 35.1 34.3 33.4 32.6 31.8 31.1 30.3 29.5 28.8 28.171 35.0 34.2 33.3 32.5 31.7 30.9 30.1 29.4 28.6 27.972 34.9 34.1 33.2 32.4 31.6 30.8 30.0 29.2 28.4 27.773 34.8 34.0 33.1 32.3 31.5 30.6 29.8 29.1 28.3 27.574 34.8 33.9 33.0 32.2 31.4 30.5 29.7 28.9 28.1 27.4

75 34.7 33.8 33.0 32.1 31.3 30.4 29.6 28.8 28.0 27.276 34.6 33.8 32.9 32.0 31.2 30.3 29.5 28.7 27.9 27.177 34.6 33.7 32.8 32.0 31.1 30.3 29.4 28.6 27.8 27.078 34.5 33.6 32.8 31.9 31.0 30.2 29.3 28.5 27.7 26.979 34.5 33.6 32.7 31.8 31.0 30.1 29.3 28.4 27.6 26.8

80 34.5 33.6 32.7 31.8 30.9 30.1 29.2 28.4 27.5 26.781 34.4 33.5 32.6 31.8 30.9 30.0 29.2 28.3 27.5 26.682 34.4 33.5 32.6 31.7 30.8 30.0 29.1 28.3 27.4 26.683 34.4 33.5 32.6 31.7 30.8 29.9 29.1 28.2 27.4 26.584 34.3 33.4 32.5 31.7 30.8 29.9 29.0 28.2 27.3 26.5

85 34.3 33.4 32.5 31.6 30.7 29.9 29.0 28.1 27.3 26.486 34.3 33.4 32.5 31.6 30.7 29.8 29.0 28.1 27.2 26.487 34.3 33.4 32.5 31.6 30.7 29.8 28.9 28.1 27.2 26.488 34.3 33.4 32.5 31.6 30.7 29.8 28.9 28.0 27.2 26.389 34.3 33.3 32.4 31.5 30.7 29.8 28.9 28.0 27.2 26.3

90 34.2 33.3 32.4 31.5 30.6 29.8 28.9 28.0 27.1 26.391 34.2 33.3 32.4 31.5 30.6 29.7 28.9 28.0 27.1 26.392 34.2 33.3 32.4 31.5 30.6 29.7 28.8 28.0 27.1 26.293 34.2 33.3 32.4 31.5 30.6 29.7 28.8 28.0 27.1 26.294 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.1 26.2

95 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.1 26.296 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.0 26.2

Page 90






Ages 50 51 52 53 54 55 56 57 58 59

97 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.0 26.298 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.0 26.299 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.0 26.2

100 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.0 26.1101 34.2 33.3 32.4 31.5 30.6 29.7 28.8 27.9 27.0 26.1102 34.2 33.3 32.4 31.4 30.5 29.7 28.8 27.9 27.0 26.1103 34.2 33.3 32.4 31.4 30.5 29.7 28.8 27.9 27.0 26.1104 34.2 33.3 32.4 31.4 30.5 29.6 28.8 27.9 27.0 26.1

105 34.2 33.3 32.3 31.4 30.5 29.6 28.8 27.9 27.0 26.1106 34.2 33.3 32.3 31.4 30.5 29.6 28.8 27.9 27.0 26.1107 34.2 33.3 32.3 31.4 30.5 29.6 28.8 27.9 27.0 26.1108 34.2 33.3 32.3 31.4 30.5 29.6 28.8 27.9 27.0 26.1109 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1

110 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1111 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1112 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1113 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1114 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1

115+ 34.2 33.3 32.3 31.4 30.5 29.6 28.7 27.9 27.0 26.1



Ages 60 61 62 63 64 65 66 67 68 69

60 30.9 30.4 30.0 29.6 29.2 28.8 28.5 28.2 27.9 27.661 30.4 29.9 29.5 29.0 28.6 28.3 27.9 27.6 27.3 27.062 30.0 29.5 29.0 28.5 28.1 27.7 27.3 27.0 26.7 26.463 29.6 29.0 28.5 28.1 27.6 27.2 26.8 26.4 26.1 25.764 29.2 28.6 28.1 27.6 27.1 26.7 26.3 25.9 25.5 25.2

65 28.8 28.3 27.7 27.2 26.7 26.2 25.8 25.4 25.0 24.666 28.5 27.9 27.3 26.8 26.3 25.8 25.3 24.9 24.5 24.167 28.2 27.6 27.0 26.4 25.9 25.4 24.9 24.4 24.0 23.668 27.9 27.3 26.7 26.1 25.5 25.0 24.5 24.0 23.5 23.169 27.6 27.0 26.4 25.7 25.2 24.6 24.1 23.6 23.1 22.6

70 27.4 26.7 26.1 25.4 24.8 24.3 23.7 23.2 22.7 22.271 27.2 26.5 25.8 25.2 24.5 23.9 23.4 22.8 22.3 21.872 27.0 26.3 25.6 24.9 24.3 23.7 23.1 22.5 22.0 21.473 26.8 26.1 25.4 24.7 24.0 23.4 22.8 22.2 21.6 21.174 26.6 25.9 25.2 24.5 23.8 23.1 22.5 21.9 21.3 20.8

75 26.5 25.7 25.0 24.3 23.6 22.9 22.3 21.6 21.0 20.5

Page 91






Ages 60 61 62 63 64 65 66 67 68 69

76 26.3 25.6 24.8 24.1 23.4 22.7 22.0 21.4 20.8 20.277 26.2 25.4 24.7 23.9 23.2 22.5 21.8 21.2 20.6 19.978 26.1 25.3 24.6 23.8 23.1 22.4 21.7 21.0 20.3 19.779 26.0 25.2 24.4 23.7 22.9 22.2 21.5 20.8 20.1 19.5

80 25.9 25.1 24.3 23.6 22.8 22.1 21.3 20.6 20.0 19.381 25.8 25.0 24.2 23.4 22.7 21.9 21.2 20.5 19.8 19.182 25.8 24.9 24.1 23.4 22.6 21.8 21.1 20.4 19.7 19.083 25.7 24.9 24.1 23.3 22.5 21.7 21.0 20.2 19.5 18.884 25.6 24.8 24.0 23.2 22.4 21.6 20.9 20.1 19.4 18.7

85 25.6 24.8 23.9 23.1 22.3 21.6 20.8 20.1 19.3 18.686 25.5 24.7 23.9 23.1 22.3 21.5 20.7 20.0 19.2 18.587 25.5 24.7 23.8 23.0 22.2 21.4 20.7 19.9 19.2 18.488 25.5 24.6 23.8 23.0 22.2 21.4 20.6 19.8 19.1 18.389 25.4 24.6 23.8 22.9 22.1 21.3 20.5 19.8 19.0 18.3

90 25.4 24.6 23.7 22.9 22.1 21.3 20.5 19.7 19.0 18.291 25.4 24.5 23.7 22.9 22.1 21.3 20.5 19.7 18.9 18.292 25.4 24.5 23.7 22.9 22.0 21.2 20.4 19.6 18.9 18.193 25.4 24.5 23.7 22.8 22.0 21.2 20.4 19.6 18.8 18.194 25.3 24.5 23.6 22.8 22.0 21.2 20.4 19.6 18.8 18.0

95 25.3 24.5 23.6 22.8 22.0 21.1 20.3 19.6 18.8 18.096 25.3 24.5 23.6 22.8 21.9 21.1 20.3 19.5 18.8 18.097 25.3 24.5 23.6 22.8 21.9 21.1 20.3 19.5 18.7 18.098 25.3 24.4 23.6 22.8 21.9 21.1 20.3 19.5 18.7 17.999 25.3 24.4 23.6 22.7 21.9 21.1 20.3 19.5 18.7 17.9

100 25.3 24.4 23.6 22.7 21.9 21.1 20.3 19.5 18.7 17.9101 25.3 24.4 23.6 22.7 21.9 21.1 20.2 19.4 18.7 17.9102 25.3 24.4 23.6 22.7 21.9 21.1 20.2 19.4 18.6 17.9103 25.3 24.4 23.6 22.7 21.9 21.0 20.2 19.4 18.6 17.9104 25.3 24.4 23.5 22.7 21.9 21.0 20.2 19.4 18.6 17.8

105 25.3 24.4 23.5 22.7 21.9 21.0 20.2 19.4 18.6 17.8106 25.3 24.4 23.5 22.7 21.9 21.0 20.2 19.4 18.6 17.8107 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8108 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8109 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8

110 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8111 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8112 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8113 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8114 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8

115+ 25.2 24.4 23.5 22.7 21.8 21.0 20.2 19.4 18.6 17.8

Page 92






Ages 70 71 72 73 74 75 76 77 78 79

70 21.8 21.3 20.9 20.6 20.2 19.9 19.6 19.4 19.1 18.971 21.3 20.9 20.5 20.1 19.7 19.4 19.1 18.8 18.5 18.372 20.9 20.5 20.0 19.6 19.3 18.9 18.6 18.3 18.0 17.773 20.6 20.1 19.6 19.2 18.8 18.4 18.1 17.8 17.5 17.274 20.2 19.7 19.3 18.8 18.4 18.0 17.6 17.3 17.0 16.7

75 19.9 19.4 18.9 18.4 18.0 17.6 17.2 16.8 16.5 16.276 19.6 19.1 18.6 18.1 17.6 17.2 16.8 16.4 16.0 15.777 19.4 18.8 18.3 17.8 17.3 16.8 16.4 16.0 15.6 15.378 19.1 18.5 18.0 17.5 17.0 16.5 16.0 15.6 15.2 14.979 18.9 18.3 17.7 17.2 16.7 16.2 15.7 15.3 14.9 14.5

80 18.7 18.1 17.5 16.9 16.4 15.9 15.4 15.0 14.5 14.181 18.5 17.9 17.3 16.7 16.2 15.6 15.1 14.7 14.2 13.882 18.3 17.7 17.1 16.5 15.9 15.4 14.9 14.4 13.9 13.583 18.2 17.5 16.9 16.3 15.7 15.2 14.7 14.2 13.7 13.284 18.0 17.4 16.7 16.1 15.5 15.0 14.4 13.9 13.4 13.0

85 17.9 17.3 16.6 16.0 15.4 14.8 14.3 13.7 13.2 12.886 17.8 17.1 16.5 15.8 15.2 14.6 14.1 13.5 13.0 12.587 17.7 17.0 16.4 15.7 15.1 14.5 13.9 13.4 12.9 12.488 17.6 16.9 16.3 15.6 15.0 14.4 13.8 13.2 12.7 12.289 17.6 16.9 16.2 15.5 14.9 14.3 13.7 13.1 12.6 12.0

90 17.5 16.8 16.1 15.4 14.8 14.2 13.6 13.0 12.4 11.991 17.4 16.7 16.0 15.4 14.7 14.1 13.5 12.9 12.3 11.892 17.4 16.7 16.0 15.3 14.6 14.0 13.4 12.8 12.2 11.793 17.3 16.6 15.9 15.2 14.6 13.9 13.3 12.7 12.1 11.694 17.3 16.6 15.9 15.2 14.5 13.9 13.2 12.6 12.0 11.5

95 17.3 16.5 15.8 15.1 14.5 13.8 13.2 12.6 12.0 11.496 17.2 16.5 15.8 15.1 14.4 13.8 13.1 12.5 11.9 11.397 17.2 16.5 15.8 15.1 14.4 13.7 13.1 12.5 11.9 11.398 17.2 16.4 15.7 15.0 14.3 13.7 13.0 12.4 11.8 11.299 17.2 16.4 15.7 15.0 14.3 13.6 13.0 12.4 11.8 11.2

100 17.1 16.4 15.7 15.0 14.3 13.6 12.9 12.3 11.7 11.1101 17.1 16.4 15.6 14.9 14.2 13.6 12.9 12.3 11.7 11.1102 17.1 16.4 15.6 14.9 14.2 13.5 12.9 12.2 11.6 11.0103 17.1 16.3 15.6 14.9 14.2 13.5 12.9 12.2 11.6 11.0104 17.1 16.3 15.6 14.9 14.2 13.5 12.8 12.2 11.6 11.0

105 17.1 16.3 15.6 14.9 14.2 13.5 12.8 12.2 11.5 10.9106 17.1 16.3 15.6 14.8 14.1 13.5 12.8 12.2 11.5 10.9107 17.0 16.3 15.6 14.8 14.1 13.4 12.8 12.1 11.5 10.9108 17.0 16.3 15.5 14.8 14.1 13.4 12.8 12.1 11.5 10.9109 17.0 16.3 15.5 14.8 14.1 13.4 12.8 12.1 11.5 10.9

Page 93






Ages 70 71 72 73 74 75 76 77 78 79

110 17.0 16.3 15.5 14.8 14.1 13.4 12.7 12.1 11.5 10.9111 17.0 16.3 15.5 14.8 14.1 13.4 12.7 12.1 11.5 10.8112 17.0 16.3 15.5 14.8 14.1 13.4 12.7 12.1 11.5 10.8113 17.0 16.3 15.5 14.8 14.1 13.4 12.7 12.1 11.4 10.8114 17.0 16.3 15.5 14.8 14.1 13.4 12.7 12.1 11.4 10.8

115+ 17.0 16.3 15.5 14.8 14.1 13.4 12.7 12.1 11.4 10.8



AGES 80 81 82 83 84 85 86 87 88 89

80 13.8 13.4 13.1 12.8 12.6 12.3 12.1 11.9 11.7 11.581 13.4 13.1 12.7 12.4 12.2 11.9 11.7 11.4 11.3 11.182 13.1 12.7 12.4 12.1 11.8 11.5 11.3 11.0 10.8 10.683 12.8 12.4 12.1 11.7 11.4 11.1 10.9 10.6 10.4 10.284 12.6 12.2 11.8 11.4 11.1 10.8 10.5 10.3 10.1 9.9

85 12.3 11.9 11.5 11.1 10.8 10.5 10.2 9.9 9.7 9.586 12.1 11.7 11.3 10.9 10.5 10.2 9.9 9.6 9.4 9.287 11.9 11.4 11.0 10.6 10.3 9.9 9.6 9.4 9.1 8.988 11.7 11.3 10.8 10.4 10.1 9.7 9.4 9.1 8.8 8.689 11.5 11.1 10.6 10.2 9.9 9.5 9.2 8.9 8.6 8.3

90 11.4 10.9 10.5 10.1 9.7 9.3 9.0 8.6 8.3 8.191 11.3 10.8 10.3 9.9 9.5 9.1 8.8 8.4 8.1 7.992 11.2 10.7 10.2 9.8 9.3 9.0 8.6 8.3 8.0 7.793 11.1 10.6 10.1 9.6 9.2 8.8 8.5 8.1 7.8 7.594 11.0 10.5 10.0 9.5 9.1 8.7 8.3 8.0 7.6 7.3

95 10.9 10.4 9.9 9.4 9.0 8.6 8.2 7.8 7.5 7.296 10.8 10.3 9.8 9.3 8.9 8.5 8.1 7.7 7.4 7.197 10.7 10.2 9.7 9.2 8.8 8.4 8.0 7.6 7.3 6.998 10.7 10.1 9.6 9.2 8.7 8.3 7.9 7.5 7.1 6.899 10.6 10.1 9.6 9.1 8.6 8.2 7.8 7.4 7.0 6.7

100 10.6 10.0 9.5 9.0 8.5 8.1 7.7 7.3 6.9 6.6101 10.5 10.0 9.4 9.0 8.5 8.0 7.6 7.2 6.9 6.5102 10.5 9.9 9.4 8.9 8.4 8.0 7.5 7.1 6.8 6.4103 10.4 9.9 9.4 8.8 8.4 7.9 7.5 7.1 6.7 6.3104 10.4 9.8 9.3 8.8 8.3 7.9 7.4 7.0 6.6 6.3

105 10.4 9.8 9.3 8.8 8.3 7.8 7.4 7.0 6.6 6.2106 10.3 9.8 9.2 8.7 8.2 7.8 7.3 6.9 6.5 6.2107 10.3 9.8 9.2 8.7 8.2 7.7 7.3 6.9 6.5 6.1108 10.3 9.7 9.2 8.7 8.2 7.7 7.3 6.8 6.4 6.1109 10.3 9.7 9.2 8.7 8.2 7.7 7.2 6.8 6.4 6.0

110 10.3 9.7 9.2 8.6 8.1 7.7 7.2 6.8 6.4 6.0111 10.3 9.7 9.1 8.6 8.1 7.6 7.2 6.8 6.3 6.0112 10.2 9.7 9.1 8.6 8.1 7.6 7.2 6.7 6.3 5.9113 10.2 9.7 9.1 8.6 8.1 7.6 7.2 6.7 6.3 5.9114 10.2 9.7 9.1 8.6 8.1 7.6 7.1 6.7 6.3 5.9

115+ 10.2 9.7 9.1 8.6 8.1 7.6 7.1 6.7 6.3 5.9

Page 94





AGES 90 91 92 93 94 95 96 97 98 99

90 7.8 7.6 7.4 7.2 7.1 6.9 6.8 6.6 6.5 6.491 7.6 7.4 7.2 7.0 6.8 6.7 6.5 6.4 6.3 6.192 7.4 7.2 7.0 6.8 6.6 6.4 6.3 6.1 6.0 5.993 7.2 7.0 6.8 6.6 6.4 6.2 6.1 5.9 5.8 5.694 7.1 6.8 6.6 6.4 6.2 6.0 5.9 5.7 5.6 5.4

95 6.9 6.7 6.4 6.2 6.0 5.8 5.7 5.5 5.4 5.296 6.8 6.5 6.3 6.1 5.9 5.7 5.5 5.3 5.2 5.097 6.6 6.4 6.1 5.9 5.7 5.5 5.3 5.2 5.0 4.998 6.5 6.3 6.0 5.8 5.6 5.4 5.2 5.0 4.8 4.799 6.4 6.1 5.9 5.6 5.4 5.2 5.0 4.9 4.7 4.5

100 6.3 6.0 5.8 5.5 5.3 5.1 4.9 4.7 4.5 4.4101 6.2 5.9 5.6 5.4 5.2 5.0 4.8 4.6 4.4 4.2102 6.1 5.8 5.5 5.3 5.1 4.8 4.6 4.4 4.3 4.1103 6.0 5.7 5.4 5.2 5.0 4.7 4.5 4.3 4.1 4.0104 5.9 5.6 5.4 5.1 4.9 4.6 4.4 4.2 4.0 3.8

105 5.9 5.6 5.3 5.0 4.8 4.5 4.3 4.1 3.9 3.7106 5.8 5.5 5.2 4.9 4.7 4.5 4.2 4.0 3.8 3.6107 5.8 5.4 5.1 4.9 4.6 4.4 4.2 3.9 3.7 3.5108 5.7 5.4 5.1 4.8 4.6 4.3 4.1 3.9 3.7 3.5109 5.7 5.3 5.0 4.8 4.5 4.3 4.0 3.8 3.6 3.4

110 5.6 5.3 5.0 4.7 4.5 4.2 4.0 3.8 3.5 3.3111 5.6 5.3 5.0 4.7 4.4 4.2 3.9 3.7 3.5 3.3112 5.6 5.3 4.9 4.7 4.4 4.1 3.9 3.7 3.5 3.2113 5.6 5.2 4.9 4.6 4.4 4.1 3.9 3.6 3.4 3.2114 5.6 5.2 4.9 4.6 4.3 4.1 3.9 3.6 3.4 3.2

115+ 5.5 5.2 4.9 4.6 4.3 4.1 3.8 3.6 3.4 3.1

Page 95






AGES 100 101 102 103 104 105 106 107 108 109

100 4.2 4.1 3.9 3.8 3.7 3.5 3.4 3.3 3.3 3.2101 4.1 3.9 3.7 3.6 3.5 3.4 3.2 3.1 3.1 3.0102 3.9 3.7 3.6 3.4 3.3 3.2 3.1 3.0 2.9 2.8103 3.8 3.6 3.4 3.3 3.2 3.0 2.9 2.8 2.7 2.6104 3.7 3.5 3.3 3.2 3.0 2.9 2.7 2.6 2.5 2.4

105 3.5 3.4 3.2 3.0 2.9 2.7 2.6 2.5 2.4 2.3106 3.4 3.2 3.1 2.9 2.7 2.6 2.4 2.3 2.2 2.1107 3.3 3.1 3.0 2.8 2.6 2.5 2.3 2.2 2.1 2.0108 3.3 3.1 2.9 2.7 2.5 2.4 2.2 2.1 1.9 1.8109 3.2 3.0 2.8 2.6 2.4 2.3 2.1 2.0 1.8 1.7

110 3.1 2.9 2.7 2.5 2.3 2.2 2.0 1.9 1.7 1.6111 3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.8 1.6 1.5112 3.0 2.8 2.6 2.4 2.2 2.0 1.9 1.7 1.5 1.4113 3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.5 1.3114 3.0 2.7 2.5 2.3 2.1 1.9 1.8 1.6 1.4 1.3

115+ 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 1.4 1.2



AGES 110 111 112 113 114 115+

110 1.5 1.4 1.3 1.2 1.1 1.1111 1.4 1.2 1.1 1.1 1.0 1.0112 1.3 1.1 1.0 1.0 1.0 1.0113 1.2 1.1 1.0 1.0 1.0 1.0114 1.1 1.0 1.0 1.0 1.0 1.0

115+ 1.1 1.0 1.0 1.0 1.0 1.0

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APPENDIX C. Uniform Lifetime Table

Table III(Uniform Lifetime)

(For Use by:• Unmarried Owners,• Married Owners Whose Spouses Are Not More Than 10 Years Younger, and• Married Owners Whose Spouses Are Not the Sole Beneficiaries of their IRAs)

Age Distribution Period Age Distribution Period

70 27.4 93 9.671 26.5 94 9.172 25.6 95 8.673 24.7 96 8.174 23.8 97 7.6

75 22.9 98 7.176 22.0 99 6.777 21.2 100 6.378 20.3 101 5.979 19.5 102 5.5

80 18.7 103 5.281 17.9 104 4.982 17.1 105 4.583 16.3 106 4.284 15.5 107 3.9

85 14.8 108 3.786 14.1 109 3.487 13.4 110 3.188 12.7 111 2.989 12.0 112 2.6

90 11.4 113 2.491 10.8 114 2.192 10.2 115 and over 1.9

■

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To help us develop a more useful index, please let us know if you have ideas for index entries.Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Compensation: Cost basis . . . . . . . . . . . . . . . . . . . . . . . . 37Alimony and separate Credit, for retirement savings1-year waiting period . . . . . . . . . . . . 23

maintenance . . . . . . . . . . . . . . . . . . 8 contributions . . . . . . . . . . . . . . . . . . 672-year rule . . . . . . . . . . . . . . . . . . . . . . . . 66Commissions . . . . . . . . . . . . . . . . . . . . 85-year rule . . . . . . . . . . . . . . . . . . . . . . . . 35Defined . . . . . . . . . . . . . . . . . . . . . . . . . . 850 or older . . . . . . . . . . . . . . . . . . . . . . . . 4 DEmployee . . . . . . . . . . . . . . . . . . . . . . . 64

591/2 years old . . . . . . . . . . . . . . . . . . . . 49 Deductible contributions . . . . . . . . 11Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . 5560-day time limit . . . . . . . . . . . . . . . . . 22 Deductible employee contributionsSelf-employment . . . . . . . . . . . . . 8, 65

(DECs) . . . . . . . . . . . . . . . . . . . . . . . . . 25701/2 years old . . . . . . . . . . . . . . . . . . . . 11 Wages, salaries, etc. . . . . . . . . . . . . 8Deduction limits:Conduit IRA . . . . . . . . . . . . . . . . . . . . . . 25

Full deduction . . . . . . . . . . . . . . . . . . . 12Contribution limits:A Reduced or no deduction . . . . . . . 13More than one IRA . . . . . . . . . . . . . 10Account balance . . . . . . . . . . . . . . . . . 32 Deduction phaseout . . . . . . . . . . . . . 14Reduced . . . . . . . . . . . . . . . . . . . . . . . . 57Additional taxes . . . . . . . . . . . . . . . . . 41 Deduction, federal estateRoth IRA . . . . . . . . . . . . . . . . . . . . . . . . 55Adjusted gross income limit: tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21SIMPLE IRA . . . . . . . . . . . . . . . . . . . . 65Filing status . . . . . . . . . . . . . . . . . . . . . 15 Defined:Spousal IRA . . . . . . . . . . . . . . . . . . . . 10Income from IRA Benefit plan . . . . . . . . . . . . . . . . . . . . . 13To traditional and Roth IRAs . . . . 56

distributions . . . . . . . . . . . . . . . . . . 15 Contribution plan . . . . . . . . . . . . . . . 12Traditional IRA . . . . . . . . . . . . . . . . . . 10Modified AGI . . . . . . . . . . . . . . . . 15, 55 Deposit, frozen . . . . . . . . . . . . . . . . . . . 22Contributions:

Age: Designated beneficiary . . . . . . . . . . 34And distributions in 2003 . . . . . . . 1650 or older . . . . . . . . . . . . . . . . . . . . . . . 4 Disabled . . . . . . . . . . . . . . . . . . . . . . . . . . 50Annuity or endowment591/2 rule . . . . . . . . . . . . . . . . . . . . . . . . 49 contracts . . . . . . . . . . . . . . . . . . . . . 10 Disclosures, required . . . . . . . . . . . . 9701/2 rule . . . . . . . . . . . . . . . . . . . . . . . . 11 Conversion . . . . . . . . . . . . . . . . . . . . . 27 Distribution period . . . . . . . . . . . . . . 33

Age limit: Deductible . . . . . . . . . . . . . . . . . . . . . . 11 Distributions:Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . 54 Deductible employee . . . . . . . . . . . 25 After death of owner . . . . . . . . 33, 62

Designating the year . . . . . . . . . . . . 11Traditional IRA . . . . . . . . . . . . . . . 7, 11 Age 591/2 rule . . . . . . . . . . . . . . . . . . . 49Employee-elected . . . . . . . . . . . . . . 65Annuity . . . . . . . . . . . . . . . 10, 32, 38, 50 And contributions in 2003 . . . . . . . 16Employer . . . . . . . . . . . . . . . . . . . 28, 66 Annuity contracts . . . . . . . . . . . . . . . 38Annuity distributions:Employer matching . . . . . . . . . . . . . 65 Beneficiaries . . . . . . . . . . . . . . . . 18, 62From an insuranceExcess . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Beneficiary other thancompany . . . . . . . . . . . . . . . . . . . . . 36Filing before making your spouse . . . . . . . . . . . . . . . . . . . . . . . 18

contribution . . . . . . . . . . . . . . . . . . . 11 Exceptions to age 591/2 rule . . . . . 49B Filing status . . . . . . . . . . . . . . . . . . . . . 11 Fully or partly taxable . . . . . . . . . . . 37Basis . . . . . . . . . . . . . . . . . . . . . 16, 37, 59 Form of . . . . . . . . . . . . . . . . . . . . . . . . . 10 Income from . . . . . . . . . . . . . . . . . . . . 15

Less than maximum . . . . . . . . . . . . 11Beginning date, required . . . . . . . . 31 Inherited IRAs . . . . . . . . . . . . . . . . . . 18Matching (SIMPLE) . . . . . . . . . . . . . 65 Installments . . . . . . . . . . . . . . . . . . . . . 35Beneficiary:More than maximum . . . . . . . . . . . . 11 Insufficient . . . . . . . . . . . . . . . . . . . . . . 52An individual . . . . . . . . . . . . . . . . . . . . 34Nondeductible . . . . . . . . . . . . . . . . . . 16 Losses on Roth IRAs: . . . . . . . . . . 62Change of . . . . . . . . . . . . . . . . . . . . . . 32Nonelective employer . . . . . . . 65, 66 Losses on traditional IRAs . . . . . . 38Date determined . . . . . . . . . . . . . . . . 34Not required . . . . . . . . . . . . . . . . . . . . 11 Not qualified . . . . . . . . . . . . . . . . . . . . 63Distributions to . . . . . . . . . . . . . . . . . . 62Recharacterizing . . . . . . . . . . . . . . . . 28 Ordering rules, Roth . . . . . . . . . . . . 61Exception to additional tax . . . . . . 50 Reporting deductible . . . . . . . . . . . . 16 Partial rollovers . . . . . . . . . . . . . . . . . 23More than one . . . . . . . . . . . . . . . . . . 36 Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . 54 Period . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Not an individual . . . . . . . . . . . . . . . . 34 Salary reduction . . . . . . . . . . . . . . . . 65 Periodic . . . . . . . . . . . . . . . . . . . . . . . . . 27of IRA . . . . . . . . . . . . . . . . . . . . . . . 18, 33 SIMPLE IRA . . . . . . . . . . . . . . . . . . . . 65 Qualified . . . . . . . . . . . . . . . . . . . . . . . . 59Trust as . . . . . . . . . . . . . . . . . . . . . . . . . 36 Tax-free withdrawal . . . . . . . . . . . . . 30 Reporting and withholding

Bonds, retirement . . . . . . . . . . . . 9, 38 To traditional and Roth IRAs . . . . 56 requirements . . . . . . . . . . . . . . . . . 38Broker’s commissions . . . . . . 10, 12 Traditional IRA . . . . . . . . . . . . . . . . . . 10 Required . . . . . . . . . . . . . . . . 23, 27, 31

When to contribute . . . . . . . . . 11, 58 Retirement bonds . . . . . . . . . . . . . . . 38Conversion contribution . . . . . . . . 27 Rollovers . . . . . . . . . . . . . . . . . . . . . . . 21C Roth IRA . . . . . . . . . . . . . . . . . . . . 59, 62Conversions:

Change in marital status . . . . . . . . 32 Surviving spouse . . . . . . . . . . . . . . . 2610% additional tax on earlyChange of beneficiary . . . . . . . . . . . 32 Tax treatment . . . . . . . . . . . . . . . 37, 66distributions . . . . . . . . . . . . . . . . . . 27Collectibles . . . . . . . . . . . . . . . . . . . . . . 45 Failed . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Divorce:Comments on publication . . . . . . . . 5 From SIMPLE to Roth . . . . . . . . . . 66 Qualified domestic relationsCommissions, brokers’ . . . . . . 10, 12 From traditional to Roth . . . . . . . . . 27 order . . . . . . . . . . . . . . . . . . . . . . . . . 26Community property . . . . . . . . . . . . 10 Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . 58 Rollovers . . . . . . . . . . . . . . . . . . . . . . . 26

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Divorce: (Cont.) 8606 . . . . . . . . . . . . . . . . 16, 27, 37, 41 Limit:Transfer of interest . . . . . . . . . . . . . 26 8880 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Age . . . . . . . . . . . . . . . . . . . . . . . . . 11, 54Transfers incident to . . . . . . . . . . . . 26 W–2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Contribution . . . . . . . . . . . . 10, 54, 55

Contributions . . . . . . . . . . . . . . . . . . . 65Deduction . . . . . . . . . . . . . . . . . . . . . . . 12E H Employer matching

Early distributions: Home, first . . . . . . . . . . . . . . . . . . . . . . . 51 contributions . . . . . . . . . . . . . . . . . 65Additional tax on . . . . . . . . 49, 59, 67 How to: If covered by employer plan . . . . 13Age 591/2 rule . . . . . . . . . . . . . . . . . . . 49 Avoid failed conversion . . . . . . . . . 59 Modified AGI . . . . . . . . . . . . . . . . . . . . . 7Annuity exception . . . . . . . . . . . . . . . 50 Figure the taxable part of a Nonelective employerDeath exception . . . . . . . . . . . . . . . . 50 distribution that is not a qualified contributions . . . . . . . . . . . . . . . . . 66Defined . . . . . . . . . . . . . . . . . . . . . . . . . 49 distribution from a Roth Salary reductionDisability exception . . . . . . . . . . . . . 50 IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 contributions . . . . . . . . . . . . . . . . . 65Exceptions . . . . . . . . . . . . . . . . . . . . . . 60 Figure your reduced IRA Spousal IRA . . . . . . . . . . . . . . . . . . . . 10Exceptions to age 591/2 rule . . . . . 49 deduction . . . . . . . . . . . . . . . . . . . . . 16 Time for rollover . . . . . . . . . . . . . . . . 22First home exception . . . . . . . . . . . 51 Recharacterize a Losses on IRAs:Higher education exception . . . . . 50 contribution . . . . . . . . . . . . . . . . . . . 28 Roth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Medical insurance Set up an IRA . . . . . . . . . . . . . . . . . . . 8 Traditional . . . . . . . . . . . . . . . . . . . . . . 38exception . . . . . . . . . . . . . . . . . . . . . 50 Treat withdrawnTax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 contributions . . . . . . . . . . . . . . . . . 46Unreimbursed medical expenses MTreat withdrawn interest or other

exception . . . . . . . . . . . . . . . . . . . . . 50 Marital status, change in . . . . . . . . 32income . . . . . . . . . . . . . . . . . . . . . . . 46Education expenses . . . . . . . . . . . . . 50 Matching employer contributionsEligible employees limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65I(SIMPLE) . . . . . . . . . . . . . . . . . . . . . . . 64 Medical:Important changes . . . . . . . . . . . . . 2, 7Eligible retirement plans . . . . . . . . 22 Expenses . . . . . . . . . . . . . . . . . . . . . . . 50

Individual retirement Insurance . . . . . . . . . . . . . . . . . . . . . . . 50Employees: account . . . . . . . . . . . . . . . . . . . . . 9, 32Eligible for SIMPLE . . . . . . . . . . . . . 64 Minimum distributions:Individual retirement annuity . . . . 9,Excludable from SIMPLE . . . . . . . 64 Distribution period . . . . . . . . . . . . . . 34

32 From Roth IRA . . . . . . . . . . . . . . . . . 62Employer and employeeIndividual retirement arrangements Life expectancy . . . . . . . . . . . . . . . . . 34association trust accounts . . . . 9

(IRAs): Miscellaneous rules . . . . . . . . . . . . . 35Employer plans:How to set up . . . . . . . . . . . . . . . . . . . . 8 Which table to use . . . . . . . . . . . . . . 34Benefits from previous . . . . . . . . . . 13Roth IRA . . . . . . . . . . . . . . . . . . . . . . . . 54 Modified adjusted gross income:Covered by . . . . . . . . . . . . . . . . . . . . . 12SIMPLE IRA . . . . . . . . . . . . . . . . . . . . 63 Roth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Defined benefit plan . . . . . . . . . . . . 13Traditional IRA . . . . . . . . . . . . . . . . . . . 7 Traditional . . . . . . . . . . . . . . . . . . . . . . 15Defined contribution plan . . . . . . . 12When to set up . . . . . . . . . . . . . . . . . . 8If covered . . . . . . . . . . . . . . . . . . . . . . . 14 More than one IRA . . . . . . . . . . . . . . . 10Who can set up . . . . . . . . . . . . . . . . . . 7If spouse covered . . . . . . . . . . . . . . . 15

Inherited IRAs:Limit if covered . . . . . . . . . . . . . . . . . 13 NContributions . . . . . . . . . . . . . . . . . . . 18Nonvested employees . . . . . . . . . . 13Nondeductible contributions:Early distribution additional taxNot covered . . . . . . . . . . . . . . . . . . . . 13

Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . 16exception . . . . . . . . . . . . . . . . . . . . . 50Railroad retirementFailure to report . . . . . . . . . . . . . . . . . 16Estate and othercoverage . . . . . . . . . . . . . . . . . . . . . 13In general . . . . . . . . . . . . . . . . . . . . . . . 16considerations . . . . . . . . . . . . . . . . 18Reservists . . . . . . . . . . . . . . . . . . . . . . 13Otherwise deductible . . . . . . . . . . . 16From other than spouse . . . . 18, 27Social security coverage . . . . . . . . 13Penalty for overstatement . . . . . . 16From spouse . . . . . . . . . . . . . . . . . . . 18Volunteer firefighters . . . . . . . . . . . 13Tax on early distributions . . . . . . . 52Rollovers . . . . . . . . . . . . . . . . . . . . . . . 23Year(s) covered . . . . . . . . . . . . . . . . 12Tax on earnings . . . . . . . . . . . . . . . . 16Taxation of distributions . . . . . . . . 18Endowment contracts . . . . . . . . . . . 10 Withdrawals . . . . . . . . . . . . . . . . . . . . 31Insufficient distributions . . . . 52, 63Estate tax . . . . . . . . . . . . . . . . . . . . 21, 41

Investment in collectibles:Excess:Collectibles defined . . . . . . . . . . . . . 45 PAccumulations . . . . . . . . . . . . . . 52, 63Exception . . . . . . . . . . . . . . . . . . . . . . . 46 Penalties:Contributions . . . . . . . . . . . 31, 46, 58

IRA deduction, how to figure Failure to file Form 8606 . . . . . . . . 16reduced . . . . . . . . . . . . . . . . . . . . . . . . 16 In general . . . . . . . . . . . . . . . . . . . . . . . 41

F Overstatement of nondeductibleFiduciary . . . . . . . . . . . . . . . . . . . . . . . . . 41 contributions . . . . . . . . . . . . . . . . . 16KFiling status . . . . . . . . . . . . . . . . . . 11, 15 Prohibited transactions . . . . . . . . . 41Keogh plans . . . . . . . . . . . . . . . . . . . . . 26Firefighters, volunteer . . . . . . . . . . . 13 Reporting . . . . . . . . . . . . . . . . . . . . . . . 52First home . . . . . . . . . . . . . . . . . . . . . . . 51 Prohibited transactions:

LForm: Borrowing on an annuityLife expectancy . . . . . . . . . . . . . . 32, 331099–R . . . . . . . . . . . . . . . . . . . . 38, 46 contract . . . . . . . . . . . . . . . . . . . . . . 45

5329 . . . . . . . . . . . . . . . . . . . . 31, 51, 52 Life insurance . . . . . . . . . . . . . . . . . . . . 26 Exemptions . . . . . . . . . . . . . . . . . . . . . 45

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Prohibited transactions: (Cont.) Frozen deposit . . . . . . . . . . . . . . . . . . 22 Surviving spouse . . . . 18, 26, 34, 35Investment in collectibles . . . . . . . 45 In general . . . . . . . . . . . . . . . . . . . . . . . 21Pledging an account as Inherited . . . . . . . . . . . . . . . . . . . . . . . . 23 T

security . . . . . . . . . . . . . . . . . . . . . . . 45 Keogh plans . . . . . . . . . . . . . . . . . . . . 26 Table I (Single LifeTaxes on . . . . . . . . . . . . . . . . . . . . . . . 45 Life insurance . . . . . . . . . . . . . . . . . . . 26 Expectancy) . . . . . . . . . . . . . . . 35, 82

Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Table II (Joint Life and LastPartial . . . . . . . . . . . . . . . . . . . . . . . . . . 23Q Survivor Expectancy) . . . . . 35, 83Reporting . . . . . . . . . . . . . . . . . . . 23, 26Qualified distributions, Roth . . . . 59 Table III (Uniform Lifetime) . . . . . 35,Required distributions . . . . . . 23, 31Qualified domestic relations 97Roth IRAs . . . . . . . . . . . . . . . . . . . . . . 58order . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Table not used . . . . . . . . . . . . . . . . . . . 35Tax-sheltered annuity . . . . . . . . . . . 26

Tax year . . . . . . . . . . . . . . . . . . . . . . . . . . 12Time limit . . . . . . . . . . . . . . . . . . . . . . . 22R Tax-free withdrawals . . . . . . . . . . . . 30To an IRA . . . . . . . . . . . . . . . . . . . . . . . 21Recharacterizations . . . . . . . . . . . . . 27 Tax-sheltered annuity . . . . . . . . . . . 26Waiting period between . . . . . . . . . 23Reconversions . . . . . . . . . . . . . . . . . . . 28 Taxpayer Advocate . . . . . . . . . . . . . . 68Withholding requirements . . . . . . . 24Recordkeeping . . . . . . . . . . . . . . . . . . . 16 Traditional IRAs:Roth IRAs:

As a holding account . . . . . . . . . . . 25Reduced IRA deduction, how to Age limit . . . . . . . . . . . . . . . . . . . . . . . . 54Compensation . . . . . . . . . . . . . . . . . . . 8figure . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Compensation . . . . . . . . . . . . . . . . . . 55Conduit . . . . . . . . . . . . . . . . . . . . . . . . . 25Contribution limit . . . . . . . . . . . . . . . . 55Reporting:Contribution limits . . . . . . . . . . . . . . 10Contribution limit reduced . . . . . . . 57A recharacterization . . . . . . . . . . . . 29Contributions . . . . . . . . . . . . . . . . . . . 10Contributions . . . . . . . . . . . . . . . . . . . 54Additional taxes . . . . . . . . . . . . . . . . . 52Disclosures, required . . . . . . . . . . . . 9Conversions . . . . . . . . . . . . . . . . . . . . 58Deductible contributions . . . . . . . . 16Divorce . . . . . . . . . . . . . . . . . . . . . . . . . 26Defined . . . . . . . . . . . . . . . . . . . . . . . . . 54Nontaxable distribution on FormExample, comprehensive . . . . . . . 16Distributions . . . . . . . . . . . . . . . . . . . . 598606 . . . . . . . . . . . . . . . . . . . . . . . . . . 37Excess contributions . . . . . . . . . . . . 46Excess contributions . . . . . . . . . . . . 58Rollovers . . . . . . . . . . . . . . . . . . . 23, 26Inherited . . . . . . . . . . . . . . . . . . . . 18, 23Maximum contribution limit . . . . . 55Tax on excessKinds of IRAs . . . . . . . . . . . . . . . . . . . . 9Modified AGI . . . . . . . . . . . . . . . . . . . . 55accumulations . . . . . . . . . . . . . . . . 52Limit if covered by plan . . . . . . . . . 13Recharacterizations . . . . . . . . . . . . 27Taxable amounts . . . . . . . . . . . . . . . 38Moving assets . . . . . . . . . . . . . . . . . . 21Reconversions . . . . . . . . . . . . . . . . . . 28Taxable distributions . . . . . . . . . . . . 41Rollovers . . . . . . . . . . . . . . . . . . . . . . . 21Rollovers . . . . . . . . . . . . . . . . . . . 58, 59Required beginning date . . . . . . . . 31SEP-IRA . . . . . . . . . . . . . . . . . . . . . . . . . 9Spouse . . . . . . . . . . . . . . . . . . . . . . . . . 54Required distributions:Social security recipients . . . . . . . 13When to set up . . . . . . . . . . . . . . . . . 54Conversions . . . . . . . . . . . . . . . . . . . . 27Transfers . . . . . . . . . . . . . . . 21, 28, 66In general . . . . . . . . . . . . . . . . . . . . . . . 31Transfers to Roth IRAs . . . . . . . . . 21IRA owners . . . . . . . . . . . . . . . . . . . . . 31 S

Transfers:Miscellaneous rules . . . . . . . . . . . . . 35 Salary reductionAnd rollovers . . . . . . . . . . . . . . . . . . . 66Required beginning date . . . . . . . . 31 arrangement . . . . . . . . . . . . . . . . . . . 64Incident to divorce . . . . . . . . . . . . . . 26Rollovers . . . . . . . . . . . . . . . . . . . 23, 31 Salary reduction contributionsRollovers . . . . . . . . . . . . . . . . . . . . . . . 21Reservists . . . . . . . . . . . . . . . . . . . . . . . . 13 limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Trustee to trustee . . . . . . . . . . . . . . . 21Retirement bonds . . . . . . . . . . . . . 9, 26 Savings Incentive Match Plans for

Trust account . . . . . . . . . . . . . . . . . . . . . 9Retirement plans, eligible . . . . . . . 22 Employees (SIMPLE) (SeeTrust as beneficiary . . . . . . . . . . . . . 36SIMPLE IRAs)Retirement savings contributionsTrustee, same . . . . . . . . . . . . . . . . 29, 59credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section 501(c)(18) plan . . . . . . 10, 12Trustee-to-trustee transfer . . . . . . 21Rollovers: Self-employed person . . . . . . . . . . . 64Trustees’ fees . . . . . . . . . . . . . . . . 10, 12And transfers . . . . . . . . . . . . . . . . . . . 66 SIMPLE IRAs:Two-year rule . . . . . . . . . . . . . . . . . . . . 66Conduit IRA . . . . . . . . . . . . . . . . . . . . 25 Contributions . . . . . . . . . . . . . . . . . . . 65

Direct rollover option . . . . . . . . . . . . 24 Conversion to Roth . . . . . . . . . . . . . 66Distributions received by a In general . . . . . . . . . . . . . . . . . . . . . . . 63 W

surviving spouse . . . . . . . . . . . . . 26 Matching contributions . . . . . . . . . . 65 Withdrawals . . . . . . 30, 31, 48, 59, 66Distributions under divorce Nonelective contributions . . . . . . . 65 Withholding:

proceedings . . . . . . . . . . . . . . . . . . 26 Salary reduction IRA distributions delivered outsideEligible rollover distribution . . . . . 24 contributions . . . . . . . . . . . . . . . . . 65 the United States . . . . . . . . . . . . . 41Extension of rollover period . . . . . 22 SIMPLE Plan: On rollover . . . . . . . . . . . . . . . . . . . . . . 25From a Roth . . . . . . . . . . . . . . . . . . . . 59 Defined . . . . . . . . . . . . . . . . . . . . . . . . . 64 Tax on distributions . . . . . . . . . . . . . 41From an IRA . . . . . . . . . . . . . . . . . 3, 21 Simplified Employee Pension:From employer’s plan into an ■Defined . . . . . . . . . . . . . . . . . . . . . . . . . . 9

IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Social security recipients . . . . . . . 13From one IRA into another . . . . . . 23 Spousal IRA . . . . . . . . . . . . . . 10, 12, 54From traditional to SIMPLE . . . . 28,

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